Question Details

A plant site donated by a township to a manufacturer 



1.	For a nonmonetary exchange of plant assets, accounting recognition should not be given to
a.	a loss when the exchange has no commercial substance.
b.	a gain when the exchange has commercial substance.
c.	part of a gain when the exchange has no commercial substance and cash is paid (cash paid/received is less than 25% of the fair value of the exchange).
d.	part of a gain when the exchange has no commercial substance and cash is received (cash paid or received is less than 25% of the fair value of the exchange).

	2.	When an enterprise is the recipient of a donated asset, the account credited may be a
a.	paid-in capital account.
b.	revenue account.
c.	deferred revenue account.
d.	all of these.

	3.	A plant site donated by a township to a manufacturer that plans to open a new factory should be recorded on the manufacturer's books at
a.	the nominal cost of taking title to it.
b.	its market value.
c.	one dollar (since the site cost nothing but should be included in the balance sheet).
d.	the value assigned to it by the company's directors.

	4.	In order for a cost to be capitalized (capital expenditure), the following must be present:
a.	The useful life of an asset must be increased.
b.	The quantity of assets must be increased.
c.	The quality of assets must be increased.
d.	Any one of these.

	5.	An improvement made to a machine increased its fair market value and its production capacity by 25% without extending the machine's useful life. The cost of the improvement should be
a. 	expensed.
b.	debited to accumulated depreciation.
c.	capitalized in the machine account.
d.	allocated between accumulated depreciation and the machine account.





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