Question 1

When exchanging nonmonetary assets with another company, the preferred approach is to value the transaction based upon fair value of

Accepted Answer

A) the asset surrendered or asset received whichever is most evident 
B) the asset surrendered unless the fair value of the asset received is easier to determine 
C) the asset surrendered except for certain conditions 
D) the asset surrendered 
A) the asset surrendered or asset received whichever is most evident 
B) the asset surrendered unless the fair value of the asset received is easier to determine 
C) the asset surrendered except for certain conditions 
D) the asset surrendered

Question 2

Exhibit 10-1 Two construction companies, Fargo and Rambam, are in the construction business.Each owns a tract of land being held for development, but each company believes that the other's land is better suited to enhance the success of each planned development.Accordingly, they agree to exchange their land and have the following information:
$\begin{array}{lll}
&\text {Fargo's}&\text { Rambam's}\
&\text {Land}&\text {Land}\
\text { Cost and book value } & \$ 400,000 & \$ 250,000 \
\text { Fair value based upon appraisal } & \$ 500,000 & \$ 450,000
\end{array}$ The exchange of land was made, and based on the difference in appraised fair value, Rambam paid $50, 000 cash to Fargo.
-
Refer to Exhibit 10-1.For financial reporting purposes, Fargo should recognize a gain on this exchange in the amount of

Accepted Answer

A) $ 0 
B) $ 50, 000 
C) $100, 000 
D) $200, 000 
A) $ 0 
B) $ 50, 000 
C) $100, 000 
D) $200, 000

Question 3

On April 1, 2010, Richer Corporation purchased a new machine on a deferred payment basis.A down payment of $5, 000 was made and 10 monthly installments of $14, 000 each are to be made beginning on May 1, 2010.The cash equivalent price of the machine was $130, 000.Richer incurred and paid installation costs amounting to $6, 000.The amount to be capitalized as the cost of the machine is

Accepted Answer

A) $130, 000 
B) $136, 000 
C) $140, 000 
D) $145, 000 
A) $130, 000 
B) $136, 000 
C) $140, 000 
D) $145, 000

Question 4

During 2011, Ruby Corporation purchased three pieces of equipment at an auction for the lump sum of $200, 000.It cost Ruby $20, 000 to have the equipment delivered and installed.The equipment was appraised at the following values: $\begin{array}{ll}
\text { Machine 1 } & \$ 120,000 \
\text { Machine 2 } & 105,000 \
\text { Machine 3 } & 75,000
\end{array}$
 Machine 2 should be recorded on Ruby's books at

Accepted Answer

A) $105, 000 
B) $120, 000 
C) $ 77, 000 
D) $ 70, 000 
A) $105, 000 
B) $120, 000 
C) $ 77, 000 
D) $ 70, 000

Question 5

Discuss when the interest capitalization period begins and ends for assets constructed for a company's own use.

Accepted Answer

The interest capitalization period begin

Question 6

Regal recently purchased a building and the tract of land on which it is located.Regal plans to raze the building immediately and to erect a new building on the site.The value of the original building should be

Accepted Answer

A) written off as an extraordinary loss in the year the building is razed 
B) capitalized as part of the cost of the land 
C) depreciated over the period from the date of acquisition to the date that the building is to be razed 
D) capitalized as part of the cost of the new building 
A) written off as an extraordinary loss in the year the building is razed 
B) capitalized as part of the cost of the land 
C) depreciated over the period from the date of acquisition to the date that the building is to be razed 
D) capitalized as part of the cost of the new building

Question 7

According to GAAP, interest cost incurred to finance construction of an asset must be capitalized in which of the following situations?

Accepted Answer

A) when the asset is inventory that is routinely manufactured in large quantities on a repetitive basis 
B) when an asset is used in other than the earning activities of the firm 
C) when an asset is ready for its intended use 
D) when an asset is being constructed for a firm's own use 
A) when the asset is inventory that is routinely manufactured in large quantities on a repetitive basis 
B) when an asset is used in other than the earning activities of the firm 
C) when an asset is ready for its intended use 
D) when an asset is being constructed for a firm's own use

Question 8

An improvement made to a machine increased its production capacity by 25% without extending the machine's useful life.The cost of the improvement should be

Accepted Answer

A) recorded as an expense 
B) debited to Accumulated Depreciation 
C) capitalized in the machine account 
D) allocated between Accumulated Depreciation and the machine account 
A) recorded as an expense 
B) debited to Accumulated Depreciation 
C) capitalized in the machine account 
D) allocated between Accumulated Depreciation and the machine account

Question 9

On January 1, 2010, Ringo purchased, for $100, 000, equipment having a useful life of eight years and an estimated salvage value of $4, 000.Ringo has recorded monthly depreciation on the equipment using the straight-line method.On March 1, 2015, the equipment was sold for $46, 000.As a result of this sale, Ringo should recognize

Accepted Answer

A) no gain or loss 
B) an $8, 000 gain 
C) an $8, 000 loss 
D) a $12, 000 gain 
A) no gain or loss 
B) an $8, 000 gain 
C) an $8, 000 loss 
D) a $12, 000 gain

Question 10

The sale of a depreciable asset resulting in a gain indicates that the proceeds from the sale were

Accepted Answer

A) less than current market value 
B) greater than cost 
C) greater than book value 
D) less than book value 
A) less than current market value 
B) greater than cost 
C) greater than book value 
D) less than book value

Question 11

The Ripple Corporation acquired land, buildings, and equipment from a bankrupt company at a lump-sum price of $500, 000.At the time of acquisition, Ripple paid $20, 000 to have the assets appraised.The appraisal disclosed the following values: $\begin{array}{llr}
  \text { Land } &\$ 100,000\
 \text { Buildings } &200,000\
 \text {Equipment  } &300,000 
\end{array}$
 What costs should be assigned to the buildings?

Accepted Answer

A) $166, 667 
B) $173, 333 
C) $200, 000 
D) $260, 000 
A) $166, 667 
B) $173, 333 
C) $200, 000 
D) $260, 000

Question 12

Which of the following events is most appropriately recorded as a reduction to accumulated depreciation?

Accepted Answer

A) an addition that increases the anticipated benefits of the old asset 
B) an improvement that extends an asset's useful life 
C) an improvement that increases the asset's expected benefits beyond that originally expected 
D) a replacement of a better asset for the one currently used 
A) an addition that increases the anticipated benefits of the old asset 
B) an improvement that extends an asset's useful life 
C) an improvement that increases the asset's expected benefits beyond that originally expected 
D) a replacement of a better asset for the one currently used

Question 13

On August 1, 2010, Robbins traded in an old plant asset for a newer model that would be more productive and efficient.Data relative to the old and new plant assets follow:   A total of $10, 500 cash was given in the trade.What should be the cost of the new plant asset for financial accounting purposes?

Accepted Answer

A) $12, 000 
B) $12, 500 
C) $13, 500 
D) $13, 000 
A) $12, 000 
B) $12, 500 
C) $13, 500 
D) $13, 000

Question 14

On May 15, 2010, Retread Company acquired a new forklift in exchange for an old forklift that it had acquired in 2000.The old forklift was purchased for $20, 000 and had a book value of $5, 000.On the date of the exchange, the old forklift had a market value of $6, 000.In addition, Retread paid $18, 000 cash for the new forklift, which had a list price of $25, 000.At what amount should Retread record the new forklift for financial accounting purposes?

Accepted Answer

A) $23, 000 
B) $24, 000 
C) $20, 000 
D) $25, 000 
A) $23, 000 
B) $24, 000 
C) $20, 000 
D) $25, 000

Question 15

On August 28, 2010, Ruggle Drilling Services purchased a machine with a contract price of $400, 000 and cash terms of 2/10, n/30.The company paid $8, 000 in transportation costs and $8, 000 for installation.Sales taxes of $22, 000 were paid on the invoice amount.The machine should be recorded as a plant asset in the amount of

Accepted Answer

A) $400, 000 
B) $422, 000 
C) $428, 000 
D) $430, 000 
A) $400, 000 
B) $422, 000 
C) $428, 000 
D) $430, 000

Question 16

The Roth Company incurred the following costs in the acquisition of a plant asset: $\begin{array}{ll}
\text { Invoice price } & \$ 2,100 \
\text { Purchase discount lost } & 40 \
\text { Freight-in } & 350 \
\text { Installation } & 100 \
\text { Cost of trial nuns } & 150
\end{array}$ What is the cost of the plant asset?

Accepted Answer

A) $2, 700 
B) $2, 660 
C) $2, 550 
D) $2, 100 
A) $2, 700 
B) $2, 660 
C) $2, 550 
D) $2, 100

Question 17

An asset classified as property, plant, and equipment on the balance sheet must have which one of the following characteristics?

Accepted Answer

A) an expected life of more than one year 
B) used in the normal course of business 
C) tangible in nature 
D) all of these 
A) an expected life of more than one year 
B) used in the normal course of business 
C) tangible in nature 
D) all of these

Question 18

The debit for a sales tax paid on the purchase of a plant asset would be included in

Accepted Answer

A) the plant asset account 
B) a separate deferred charge account 
C) Miscellaneous Tax Expense 
D) Accumulated Depreciation-Machinery 
A) the plant asset account 
B) a separate deferred charge account 
C) Miscellaneous Tax Expense 
D) Accumulated Depreciation-Machinery

Question 19

Richards Corporation purchased some equipment by issuing a $20, 000 non-interest-bearing, four-year note when interest rates were 8%.Actuarial information for 8% and four periods follows: $\begin{array}{llr}
  \text { Future amount of 1 } &1.360\
 \text { Present value of 1} &0.735\
\end{array}$
 In the entry to record this purchase, there would be a

Accepted Answer

A) $20, 000 debit to Equipment 
B) $5, 299.40 credit to Discount on Notes Payable 
C) $27, 209.78 credit to Notes Payable 
D) $14, 700.60 debit to Equipment 
A) $20, 000 debit to Equipment 
B) $5, 299.40 credit to Discount on Notes Payable 
C) $27, 209.78 credit to Notes Payable 
D) $14, 700.60 debit to Equipment

Question 20

Several expenditures are listed below:
   Required:
If the expenditure would be capitalized to land, buildings, equipment, or other, so indicate with an "X." An example is given.

Accepted Answer

The answer of Several expenditures are listed below:
  ...

When exchanging nonmonetary assets with another company, the preferred approach is to value the transaction based upon fair value of

Discuss when the interest capitalization period begins and ends for assets constructed for a company's own use.

Regal recently purchased a building and the tract of land on which it is located.Regal plans to raze the building immediately and to erect a new building on the site.The value of the original building should be

According to GAAP, interest cost incurred to finance construction of an asset must be capitalized in which of the following situations?

An improvement made to a machine increased its production capacity by 25% without extending the machine's useful life.The cost of the improvement should be

The sale of a depreciable asset resulting in a gain indicates that the proceeds from the sale were

Which of the following events is most appropriately recorded as a reduction to accumulated depreciation?

The Roth Company incurred the following costs in the acquisition of a plant asset: Invoice price \ 2,100 Purchase discount lost 40 Freight-in 350 Installation 100 Cost of trial nuns 150 What is the cost of the plant asset?

An asset classified as property, plant, and equipment on the balance sheet must have which one of the following characteristics?

The debit for a sales tax paid on the purchase of a plant asset would be included in

Richards Corporation purchased some equipment by issuing a $20, 000 non-interest-bearing, four-year note when interest rates were 8%.Actuarial information for 8% and four periods follows: Future amount of 1 1.360 Present value of 1 0.735 In the entry to record this purchase, there would be a

Several expenditures are listed below: Required: If the expenditure would be capitalized to land, buildings, equipment, or other, so indicate with an "X." An example is given.

The Environment of Financial Reporting

Financial Reporting: Its Conceptual Framework

Review of a Companys Accounting System

The Balance Sheet and the Statement of Changes in Stockholders Equity

The Income Statement and the Statement of Cash Flows

Additional Aspects of Financial Reporting and Financial Analysis

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Depreciation and Depletion

Intangibles

Current Liabilities and Contingencies

Long-Term Liabilities and Receivables

Investments

Contributed Capital

Earnings Per Share and Retained Earnings

Income Recognition and Measurement of Net Assets

Accounting for Income Taxes

Accounting for Postemployment Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Time Value of Money Module

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Exam 10: Property, Plant, and Equipment: Acquisition and Disposal

When exchanging nonmonetary assets with another company, the preferred approach is to value the transaction based upon fair value of

Discuss when the interest capitalization period begins and ends for assets constructed for a company's own use.

Regal recently purchased a building and the tract of land on which it is located.Regal plans to raze the building immediately and to erect a new building on the site.The value of the original building should be

According to GAAP, interest cost incurred to finance construction of an asset must be capitalized in which of the following situations?

An improvement made to a machine increased its production capacity by 25% without extending the machine's useful life.The cost of the improvement should be

The sale of a depreciable asset resulting in a gain indicates that the proceeds from the sale were

Which of the following events is most appropriately recorded as a reduction to accumulated depreciation?

The Roth Company incurred the following costs in the acquisition of a plant asset: Invoice price \ 2,100 Purchase discount lost 40 Freight-in 350 Installation 100 Cost of trial nuns 150 What is the cost of the plant asset?

An asset classified as property, plant, and equipment on the balance sheet must have which one of the following characteristics?

The debit for a sales tax paid on the purchase of a plant asset would be included in

Richards Corporation purchased some equipment by issuing a $20, 000 non-interest-bearing, four-year note when interest rates were 8%.Actuarial information for 8% and four periods follows: Future amount of 1 1.360 Present value of 1 0.735 In the entry to record this purchase, there would be a

Several expenditures are listed below: Required: If the expenditure would be capitalized to land, buildings, equipment, or other, so indicate with an "X." An example is given.

The Environment of Financial Reporting

Financial Reporting: Its Conceptual Framework

Review of a Companys Accounting System

The Balance Sheet and the Statement of Changes in Stockholders Equity

The Income Statement and the Statement of Cash Flows

Additional Aspects of Financial Reporting and Financial Analysis

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Depreciation and Depletion

Intangibles

Current Liabilities and Contingencies

Long-Term Liabilities and Receivables

Investments

Contributed Capital

Earnings Per Share and Retained Earnings

Income Recognition and Measurement of Net Assets

Accounting for Income Taxes

Accounting for Postemployment Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Time Value of Money Module

Filters