QUESTION 1

Fred Inc. owns a delivery truck. Which of the following costs, associated with the truck, will be treated as a revenue expenditure?

		oil change and lubrication
		major engine overhaul
		modification for new use
		addition to storage capacity

QUESTION 2

Use of MACRS is acceptable for financial reporting under GAAP.

True

False

QUESTION 3

Plant assets are long-lived, tangible assets used in the operation of a business.

True

False

QUESTION 4

Iverycoast Inc. purchased a van on January 1, 2015, for $800,000. Estimated life of the van was 5 years, and its estimated residual value was $90,000. Iverycoast uses the straight-line method of depreciation. Calculate the book value of the van at the end of 2015.

		$650,000,
		$750,000
		$710,000
		$658,000

QUESTION 5

Which of the following asset categories would include the cost of clearing land and removing unwanted buildings?

		land
		buildings
		land improvements
		machinery and equipment

QUESTION 6

The lump-sum amount paid for a group of assets is divided among the assets acquired based on their relative market values. This method is known as the relative-market-value method.

True

False

QUESTION 7

Goodwill is the excess amount paid to purchase another company over the market value of its net assets.

True

False

QUESTION 8

When a corporation uses the straight-line method of depreciation, the amount of depreciation charged to expense will be reduced from year to year.

True

False

QUESTION 9

A lump-sum purchase or basket purchase involves paying a single price for several assets as a group.

True

False

QUESTION 10

Corel Sales sold its old office furniture for $5,000. Its original cost was $10,000 and at the time of sale, it had accumulated depreciation of $7,000. What was the effect of the transaction?

		gain of $5,000
		gain of $2,000
		loss of $2,000
		loss of $5,000

QUESTION 11

On January 1, 2012 Hillop Inc. had total assets of $360,000. During the year, the company purchased new machinery worth $80,000 and promised to pay the amount due after two years. Throughout the year, it earned revenue of $50,000 every month. Calculate the asset turnover ratio.

		1.2 times
		1.8 times
		1.5 times
		1.4 times

QUESTION 12

The cost of an asset is $1,000,000 and its residual value is $100,000. Estimated useful life of the asset is four years. Calculate depreciation for the first year using the double-declining-balance method of depreciation.

		$450,000
		$500,000
		$250,000
		$225,000

QUESTION 13

Danube Corp. purchased a used machine for $10,000. The machine required installation costs of $1,000 and insurance while in transit of $500. At which of the following amounts would the machine be recorded?

		$10,000
		$11,000
		$10,500
		$11,500

QUESTION 14

The asset turnover ratio measures the amount of net sales generated for each average dollar of total assets invested.

True

False

QUESTION 15

Franchises are privileges granted by a business to sell goods and services under specified conditions.

True

False

QUESTION 16

Which of the following is true of goodwill?

		Goodwill must be capitalized when acquired, and amortized over 7 years or less.
		Both created and acquired goodwill must be recorded in the books.
		Goodwill must be expensed when acquired.
		Goodwill is not amortized.

QUESTION 17

Which of the following is included in the cost of a plant asset?

		amounts paid to make the asset ready for its intended use
		regular repair and maintenance cost
		replacement of damaged parts of the asset
		wages of workers who work with the asset

QUESTION 18

On January 1, 2015, Anodel Inc. acquired a machine for $1,000,000. The estimated useful life of the asset is 5 years. Residual value at the end of 5 years is estimated to be $50,000. Calculate the depreciation expense per year using the straight-line method.

		$200,000
		$190,000
		$240,000
		$250,000

QUESTION 19

Nobells Corporation has acquired a property that included both land and a building for $500,000. The corporation hired an appraiser who has determined that the market value of the land to be $300,000 and that of the building is $400,000. At what amount should the corporation record the cost of building?

		$147,368
		$285,714
		$269,125
		$214,286

QUESTION 20

Maple Corp. had net sales of $200,550 for the year ended December 31, 2015. Its beginning and ending total assets were $75,200 and $110,500, respectively. Determine Maple's asset turnover ratio for the year ended December 31, 2015.

		0.46 times
		2.67 times
		1.18 times
		2.16 times