Question 1

Rodgers Company purchased equipment and these costs were incurred: $$\begin{array} { l r } 
\text { Cash price } & \$ 55,000 \
\text { Sales taxes } & 3,600 \
\text { Insurance during transit } & 640 \
\text { Installation and testing } & 860 \
\text { Total costs } & \$ 60,100
\end{array}$$ Rodgers will record the acquisition cost of the equipment as

Accepted Answer

The acquisition cost of equipment includes all costs necessary to acquire the asset and prepare it for use, which includes the cash price, sales taxes, insurance during transit, and installation and testing. Therefore, the total cost is $60,100.

Question 2

The balance in Accumulated Depreciation represents the

Accepted Answer

Accumulated Depreciation represents the total amount charged to expense since the acquisition of the plant asset. It is the cumulative depreciation recorded for the plant asset up to a specific point in time. Option A is incorrect as it refers to a cash fund, while Accumulated Depreciation is not a cash fund. Option B is incorrect as accumulated depreciation is not subtracted from the cost of a plant asset to determine its fair market value. Option C is incorrect as it refers to the depreciation expense for a particular period, while Accumulated Depreciation is a running total of all the depreciation expenses charged since the asset was acquired.

Question 3

Expenditures to maintain the operating efficiency and expected productive life of a plant asset are

Accepted Answer

Expenditures made to maintain the operating efficiency and expected productive life of plant assets are classified as ordinary repairs. Ordinary repairs are revenue expenditures and are charged to the period in which they are incurred. They do not increase the value or useful life of the asset beyond its original estimate, nor do they enhance or improve the asset in any way.

Question 4

Arnold Company purchases a new delivery truck for $45000.The sales taxes are $2500.The logo of the company is painted on the side of the truck for $1200.The truck's annual license is $120.The truck undergoes safety testing for $220.What does Arnold record as the cost of the new truck?

Accepted Answer

The cost of the new truck would be the initial cost of $45,000 plus the $2,500 in sales taxes plus the $1,200 for the company logo, plus the $220 for safety testing, which equals $48,920. The annual license fee of $120 is an ongoing expense and would not be included in the initial cost of the truck. Therefore, the best choice is B.

Question 5

The term applied to the periodic expiration of a plant asset's cost is

Accepted Answer

Depreciation is the term used to describe the periodic expiration of a plant asset's cost. It is a non-cash expense that represents the decline in the value of the asset over time due to wear and tear, obsolescence, or other factors. Amortization refers to the periodic expiration of the cost of intangible assets such as patents, copyrights, and trademarks. Depletion is the periodic expiration of the cost of natural resources such as timber, oil, and gas. "Cost expiration" is not a commonly used term in accounting.

Question 6

Which of the following is included in the cost of constructing a building?

Accepted Answer

The answer of Which of the following is included in...

Question 7

National 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?

Accepted Answer

Interest incurred during the construction period is capitalized as part of the cost of the building. This is in accordance with the generally accepted accounting principles (GAAP). Option A and B are incorrect because excavation fees and architect fees are both capitalized as part of the cost of building. Building permit fees are also capitalized under GAAP. Option D is incorrect because the capitalized cost is not just the contract price less any interest on borrowed funds, but also includes other direct and indirect costs associated with the construction.

Question 8

Depreciation is the process of allocating the cost of a plant asset over its useful life in a(n)

Accepted Answer

Depreciation is the process of allocating the cost of a plant asset over its useful life in a systematic and rational manner. This helps in matching the cost of the asset with the revenue it generates, and ensures that the asset is not reported on the balance sheet at its original cost after its useful life is over. Option A is incorrect because "equal and equitable" is not an appropriate way to describe the depreciation process. Option B is incorrect because "accelerated and accurate" does not reflect the concept of spreading the cost of an asset over its useful life. Option D is incorrect because "conservative market-based" does not accurately describe how depreciation is calculated.

Question 9

Interest may be included in the acquisition cost of a plant asset

Accepted Answer

Interest can be included in the acquisition cost of a plant asset during the construction period of a self-constructed asset. This is because the interest cost is considered part of the cost of constructing the asset, making it ready for its intended use.

Question 10

Wesley Hospital installs a new parking lot.The paving cost $60000 and the lights to illuminate the new parking area cost $24000.Which of the following statements is true with respect to these additions?

Accepted Answer

The cost of the paving ($60000) should be added to Land Improvements account because it is a permanent improvement to the land. The cost of the lights ($24000) should also be added to Land Improvements account as it is a permanent improvement to the land. Therefore, the total cost of additions to Land Improvements account is $84000.

Question 11

Land improvements should be depreciated over the useful life of the

Accepted Answer

Land improvements, such as parking lots, fences, or landscaping, are separate from the land itself and have a definite useful life. Therefore, they should be depreciated over their useful life, which is typically determined based on the expected period of benefit.

Question 12

Ramirez Company acquires land for $240000 cash.Additional costs are as follow. $\begin{array}{lr}
\text { Removal of shed } & \$2,000 \
\text { Filling and grading } & 6,000 \
\text { Salvage value of lumber of shed } & 1,000 \
\text { Broker commission } & 4,520 \
\text { Paving of parking lot } & 40,000 \
\text { Closing costs } & 3,400
\end{array}$ Ramirez will record the acquisition cost of the land as

Accepted Answer

The acquisition cost of the land includes the purchase price plus all costs necessary to get the land ready for its intended use. This includes removal of the shed ($2,000), filling and grading ($6,000), broker commission ($4,520), and closing costs ($3,400). The salvage value of the shed ($1,000) is subtracted. The paving of the parking lot is not included as it is a land improvement. Thus, the total cost is $240,000 + $2,000 + $6,000 + $4,520 + $3,400 - $1,000 = $254,920.

Question 13

Runge Company purchased machinery on January 1 at a list price of $300000 with a 2% discount if payment is made within a 10-day discount period.Payment was made within the discount period.Runge paid $15000 sales tax on the machinery and paid installation charges of $5300.Prior to installation Runge paid $12000 to pour a concrete slab on which to place the machinery.What is the total cost of the new machinery?

Accepted Answer

The answer of Runge Company purchased machinery on January 1...

Question 14

Carpino Company purchased equipment and these costs were incurred: $$\begin{array} { l r } 
\text { Cash price } & \$ 75,000 \
\text { Sales taxes } & 3,500 \
\text { Insurance during transit } & 750 \
\text { Installation and testing } & 1,500 \
\text { Total costs } & \$ 80,750
\end{array}$$ What amount should be recorded as the cost of the equipment?

Accepted Answer

The answer of Carpino Company purchased equipment and these costs...

Question 15

Rains Company purchased equipment on January 1 at a list price of $125000 with a 2% discount if payment is made within a 10-day discount period.Payment was made within the discount period.Rains paid $6250 sales tax on the equipment and paid installation charges of $2200.Prior to installation Rains paid $5000 to pour a concrete slab on which to place the equipment.What is the total cost of the new equipment?

Accepted Answer

The total cost of the equipment includes the purchase price after discount, sales tax, installation charges, and the cost of the concrete slab. The discounted price is $125,000 - ($125,000 * 2%) = $122,500. Adding the sales tax ($6,250), installation charges ($2,200), and concrete slab cost ($5,000) gives a total cost of $135,950.

Question 16

Which one of the following items is not a consideration when recording periodic depreciation expense on plant assets?

Accepted Answer

When recording periodic depreciation expense on plant assets, the cash needed to replace the asset is not a consideration. The other options (salvage value, estimated useful life, and cost) are all factors that need to be taken into account when calculating and recording depreciation expense.

Question 17

A company purchases a remote building site 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?

Accepted Answer

The answer of A company purchases a remote building site...

Question 18

Schrock Company purchases a new delivery van for $70000.The sales taxes are $5250.The logo of the company is painted on the side of the van for $1400.The van's annual license is $140.The van undergoes safety testing for $250.What does Schrock record as the cost of the new van?

Accepted Answer

The answer of Schrock Company purchases a new delivery van...

Question 19

Kathy's Blooms purchased a delivery van with a $60000 list price.The company was given a $6000 cash discount by the dealer and paid $3000 sales tax.Annual insurance on the van is $1500.As a result of the purchase by how much will Kathy's Blooms increase its van account?

Accepted Answer

The answer of Kathy's Blooms purchased a delivery van with...

Question 20

Ryan Inc.purchased a delivery truck with a $48000 list price.The company was given a $4800 cash discount by the dealer and paid $2400 sales tax.Annual insurance on the truck is $1200.As a result of the purchase by how much will Ryan Inc.increase its truck account?

Accepted Answer

The answer of Ryan Inc.purchased a delivery truck with a...

Quiz 7: Reporting and Analyzing Liabilities and Stockholders Equity