Question Details

CHAPTER 10 PART 5 PLANT ASSETS, NATURAL RESOURCES, AND INTANGIBLE ASSETS

MULTIPLE CHOICE QUESTIONS :

57. The cost of a purchased building includes all of the following except
a. closing costs.
b. real estate broker's commission.
c. remodeling costs.
d. All of these are included.
58. A company purchased land for $90,000 cash. Real estate brokers' commission was
$5,000 and $7,000 was spent for demolishing an old building on the land before
construction of a new building could start. Under the cost principle, the cost of land would
be recorded at
a. $97,000.
b. $90,000.
c. $95,000.
d. $102,000.
59. Which one of the following items is not considered a part of the cost of a truck purchased
for business use?
a. Sales tax
b. Truck license
c. Freight charges
d. Cost of lettering on side of truck
60. Which of the following assets does not decline in service potential over the course of its
useful life?
a. Equipment
b. Furnishings
c. Land
d. Fixtures
Plant Assets, Natural Resources, and Intangible Assets 10 - 9
61. The four subdivisions for plant assets are
a. land, land improvements, buildings, and equipment.
b. intangibles, land, buildings, and equipment.
c. furnishings and fixtures, land, buildings, and equipment.
d. property, plant, equipment, and land.
62. The cost of land does not include
a. real estate brokers' commission.
b. annual property taxes.
c. accrued property taxes assumed by the purchaser.
d. title fees.
63. Feeney Clinic purchases land for $130,000 cash. The clinic assumes $1,500 in property
taxes due on the land. The title and attorney fees totaled $1,000. The clinic has the land
graded for $2,200. What amount does Feeney Clinic record as the cost for the land?
a. $132,200
b. $130,000
c. $134,700
d. $132,500
64. Belle Company buys land for $50,000 on 12/31/07. As of 3/31/08, the land has
appreciated in value to $50,700. On 12/31/08, the land has an appraised value of
$51,800. By what amount should the Land account be increased in 2008?
a. $0
b. $700
c. $1,100
d. $1,800
65. Pine Company acquires land for $86,000 cash. Additional costs are as follows:
Removal of shed $ 300
Filling and grading 1,500
Salvage value of lumber of shed 120
Broker commission 1,130
Paving of parking lot 10,000
Closing costs 560
Pine will record the acquisition cost of the land as
a. $86,000.
b. $87,690.
c. $89,610.
d. $89,370.
66. Shawnee Hospital installs a new parking lot. The paving cost $30,000 and the lights to
illuminate the new parking area cost $15,000. Which of the following statements is true
with respect to these additions?
a. $30,000 should be debited to the Land account.
b. $15,000 should be debited to Land Improvements.
c. $45,000 should be debited to the Land account.
d. $45,000 should be debited to Land Improvements.
10 - 10 Test Bank for Accounting Principles, Eighth Edition
67. Land improvements should be depreciated over the useful life of the
a. land.
b. buildings on the land.
c. land or land improvements, whichever is longer.
d. land improvements.
68. General Molding is building a new plant that will take three years to construct. The
construction will be financed in part by funds borrowed during the construction period.
There are significant architect fees, excavation fees, and building permit fees. Which of
the following statements is true?
a. Excavation fees are capitalized but building permit fees are not.
b. Architect fees are capitalized but building permit fees are not.
c. Interest is capitalized during the construction as part of the cost of the building.
d. The capitalized cost is equal to the contract price to build the plant less any interest on
borrowed funds.
69. A company purchases a remote site building for computer operations. The building will be
suitable for operations after some expenditures. The wiring must be replaced to computer
specifications. The roof is leaky and must be replaced. All rooms must be repainted and
recarpeted and there will also be some plumbing work done. Which of the following
statements is true?
a. The cost of the building will not include the repainting and recarpeting costs.
b. The cost of the building will include the cost of replacing the roof.
c. The cost of the building is the purchase price of the building, while the additional
expenditures are all capitalized as Building Improvements.
d. The wiring is part of the computer costs, not the building cost.
70. Carley Company purchases a new delivery truck for $45,000. The sales taxes are $3,000.
The logo of the company is painted on the side of the truck for $1,200. The truck license is
$120. The truck undergoes safety testing for $220. What does Carley record as the cost of
the new truck?
a. $49,540
b. $49,420
c. $48,000
d. $47,420
71. All of the following factors in computing depreciation are estimates except
a. cost.
b. residual value.
c. salvage value.
d. useful life.
72. Stories Company purchased equipment and these costs were incurred:
Cash price $22,500
Sales taxes 1,800
Insurance during transit 320
Installation and testing 430
Total costs $25,050
Plant Assets, Natural Resources, and Intangible Assets 10 - 11
Stories will record the acquisition cost of the equipment as
a. $22,500.
b. $24,300.
c. $24,620.
d. $25,050.
73. Becky- Blooms purchased a delivery van for $20,000. The company was given a $2,000
cash discount by the dealer, and paid $1,000 sales tax. Annual insurance on the van is
$500. As a result of the purchase, by how much will Becky- Blooms increase its van
account?
a. $20,000
b. $18,000
c. $19,500
d. $19,000
74. Upton Company purchased equipment on January 1 at a list price of $50,000, with credit
terms 2/10, n/30. Payment was made within the discount period and Upton was given a
$1,000 cash discount. Upton paid $2,500 sales tax on the equipment, and paid installation
charges of $880. Prior to installation, Upton paid $2,000 to pour a concrete slab on which
to place the equipment. What is the total cost of the new equipment?
a. $52,380
b. $54,380
c. $55,380
d. $50,500
75. Interest may be included in the acquisition cost of a plant asset
a. during the construction period of a self-constructed asset.
b. if the asset is purchased on credit.
c. if the asset acquisition is financed by a long-term note payable.
d. if it is a part of a lump-sum purchase.
76. The balance in the Accumulated Depreciation account represents the
a. cash fund to be used to replace plant assets.
b. amount to be deducted from the cost of the plant asset to arrive at its fair market
value.
c. amount charged to expense in the current period.
d. amount charged to expense since the acquisition of the plant asset.
77. Which one of the following items is not a consideration when recording periodic
depreciation expense on plant assets?
a. Salvage value
b. Estimated useful life
c. Cash needed to replace the plant asset
d. Cost
78. Depreciation is the process of allocating the cost of a plant asset over its service life in
a. an equal and equitable manner.
b. an accelerated and accurate manner.
c. a systematic and rational manner.
d. a conservative market-based manner.