Question 1

Which of the following ordinarily would be treated as a revenue expenditure rather than a capital expenditure?

Accepted Answer

A) Repair and maintenance on buildings 
B) The replacement of a major component of a building 
C) An addition to an existing building 
D) Rearrangement costs that are identifiable, material, and are expected to provide discernable future benefits 
A) Repair and maintenance on buildings 
B) The replacement of a major component of a building 
C) An addition to an existing building 
D) Rearrangement costs that are identifiable, material, and are expected to provide discernable future benefits A

Question 2

Which of the following best describes the proper treatment of cash discounts on acquired machinery?

Accepted Answer

A) The historical cost of the machinery should be the invoice price; the discount should be ignored. 
B) The historical cost of the machinery should be the net-of-discount amount, regardless of whether the discount is actually taken. 
C) The historical cost of the machinery should be the net-of-discount amount only if the discount is actually taken. 
D) The historical cost of the machinery should be the invoice price plus the amount of the discount which is treated a interest capitalized on the purchase. 
A) The historical cost of the machinery should be the invoice price; the discount should be ignored. 
B) The historical cost of the machinery should be the net-of-discount amount, regardless of whether the discount is actually taken. 
C) The historical cost of the machinery should be the net-of-discount amount only if the discount is actually taken. 
D) The historical cost of the machinery should be the invoice price plus the amount of the discount which is treated a interest capitalized on the purchase. B

Question 3

A company purchased land to be used as the site for the construction of a plant.Timber was cut from the building site so that construction of the plant could begin.The proceeds from the sale of the timber should be

Accepted Answer

A) classified as other income. 
B) deducted from the cost of the land. 
C) deducted from the cost of the plant. 
D) netted against the costs to clear the land and expensed as incurred. 
A) classified as other income. 
B) deducted from the cost of the land. 
C) deducted from the cost of the plant. 
D) netted against the costs to clear the land and expensed as incurred. B

Question 4

If the cost of ordinary repairs is capitalized as an addition to the building account during the current year,

Accepted Answer

A) net income for the current year will be understated. 
B) stockholders' equity at the end of the current year will be understated. 
C) total assets at the end of the current year will not be affected. 
D) total liabilities at the end of the current year will not be affected. 
A) net income for the current year will be understated. 
B) stockholders' equity at the end of the current year will be understated. 
C) total assets at the end of the current year will not be affected. 
D) total liabilities at the end of the current year will not be affected.

Question 5

If a company constructs a laboratory building to be used as a research and development facility,the cost of the laboratory building is matched against earnings as

Accepted Answer

A) research and development expense in the period(s) of construction. 
B) depreciation deducted as part of research and development costs. 
C) depreciation or immediate write-off depending on company policy. 
D) an expense at such time as productive research and development has been obtained from the facility. 
A) research and development expense in the period(s) of construction. 
B) depreciation deducted as part of research and development costs. 
C) depreciation or immediate write-off depending on company policy. 
D) an expense at such time as productive research and development has been obtained from the facility.

Question 6

On February 12,Oceans Company purchased a tract of land as a factory site for $190,000.An existing building on the property was razed and construction was begun on a new factory building in March of the same year.Additional data are available as follows:
 
The recorded cost of the completed factory building should be

Accepted Answer

A) $1,165,000 
B) $1,220,000 
C) $1,027,500 
D) $1,082,500 
A) $1,165,000 
B) $1,220,000 
C) $1,027,500 
D) $1,082,500

Question 7

You have just been promoted to the position of senior accountant with the public accounting firm of Ohm and Dylan.Your first audit client as senior accountant is to be the United Manufacturing Company.You have had a considerable amount of experience both in planning and conducting the audit procedures for current asset accounts such as cash,receivables,and inventory.This is your first experience,however,in planning the audit of the property,plant,and equipment accounts.Compare the nature of current assets with property,plant,and equipment,and describe how any differences might affect your audit generally.

Accepted Answer

The audit work required to verify the pr

Question 8

The following balances are from the records of the Summertime Outdoor Equipment Company :
   
Prepare a partial balance sheet and income statement using the information provided above.

Accepted Answer

The answer of The following balances are from the records...

Question 9

Sonora Company borrowed $400,000 on a 10 percent note payable to finance a new warehouse Sonora is constructing for its own use.The only other debt on Sonora's books is a $600,000,12 percent mortgage payable on an office building.At the end of the current year,average accumulated expenditures on the new warehouse totaled $475,000.Sonora should capitalize interest for the current year in the amount of

Accepted Answer

A) $40,000. 
B) $47,500. 
C) $49,000. 
D) $52,250. 
A) $40,000. 
B) $47,500. 
C) $49,000. 
D) $52,250.

Question 10

A machine with an original estimated useful life of ten years is moved to another location in the factory after it had been in service for three years.The efficiency of the machine is increased for its remaining useful life.The reinstallation costs should be capitalized if the remaining useful life of the machine is

Accepted Answer

The answer of A machine with an original estimated useful...

Question 11

On March 1,2014,the Hauk Company paid $400,000 for all the issued and outstanding stock of Bodo Corporation in a transaction properly accounted for as a purchase.The market values of the assets and liabilities of Bodo Corporation on March 1,2014,are as follows:
   
Make the journal entry necessary for Hauk to record the purchase.

Accepted Answer

The answer of On March 1,2014,the Hauk Company paid $400,000...

Question 12

Which of the following is true?

Accepted Answer

A) The Financial Accounting Standards Board has never permitted the disclosure of the fair values of noncurrent operating assets in the notes to financial statements. 
B) The SEC currently requires the disclosure of the fair values of noncurrent operating assets in the notes to financial statements of companies that are registered with the SEC. 
C) The Financial Accounting Standards Board currently requires the disclosure of the fair values of noncurrent operating assets in the notes to the financial statements. 
D) Disclosure of the fair values of noncurrent operating assets in the notes to the financial statements is currently encouraged but not required by the Financial Accounting Standards Board. 
A) The Financial Accounting Standards Board has never permitted the disclosure of the fair values of noncurrent operating assets in the notes to financial statements. 
B) The SEC currently requires the disclosure of the fair values of noncurrent operating assets in the notes to financial statements of companies that are registered with the SEC. 
C) The Financial Accounting Standards Board currently requires the disclosure of the fair values of noncurrent operating assets in the notes to the financial statements. 
D) Disclosure of the fair values of noncurrent operating assets in the notes to the financial statements is currently encouraged but not required by the Financial Accounting Standards Board.

Question 13

On September 10,Gravelly Company incurred the following costs for one of its printing presses:
 
Neither the attachment nor the renovation increased the estimated useful life of the press.However,the renovation resulted in significantly increased productivity.What amount of the costs should be capitalized?

Accepted Answer

A) $198,000 
B) $110,000 
C) $90,000 
D) $88,000 
A) $198,000 
B) $110,000 
C) $90,000 
D) $88,000

Question 14

Grabber Industries purchased the net assets of Easy Company for $1,300,000,comprised of $1,200,000 of cash and a contingent performance condition of $100,000.A schedule of the net assets of Easy Company,as recorded on Easy Company's books at the time of the acquisition,is as follows:

The following schedule shows the differences between the recorded costs and market values of the assets of Easy Company at the date of the acquisition:
   
Prepare the journal entry to record this acquisition using the acquisition method prescribed by SFAS 141R,,"Business Combinations."

Accepted Answer

The cost in excess of fair value is dete

Question 15

The term "intangible assets" is used in accounting to denote

Accepted Answer

A) current or noncurrent property items without physical characteristics. 
B) assets with lesser economic significance because of the nature of such assets. 
C) such items as patents, copyrights, and claims against customers which can be valued on a monetary basis. 
D) properties without physical characteristics that have long-term effects on a business enterprise. 
A) current or noncurrent property items without physical characteristics. 
B) assets with lesser economic significance because of the nature of such assets. 
C) such items as patents, copyrights, and claims against customers which can be valued on a monetary basis. 
D) properties without physical characteristics that have long-term effects on a business enterprise.

Question 16

One of the most critical steps in recording the acquisition of assets is the determination of the cost assigned to the asset.Data related to assets acquired by Mindset Manufacturing Company are as follows:
(1)Machine A was purchased at a list price of $102,000; terms 2/10,net 30.The machine invoice was paid after the discount period.Transportation charges were $1,270; installation costs were $920; and the cost of a trial run was $960.Normal repairs and maintenance for the first year were $410.
(2)Machine B could be purchased for five annual payments of $6,332 or $29,400 in cash.Mindset elected to purchase Machine B under the installment plan.Other related acquisition costs totaled $175.
(3)On May 12,2014,Alberta Company offered to sell land to Mindset for $62,000; the offer was rejected.On June 29,2,125 shares of Mindset common stock were issued in exchange for the land.The par value of the stock was $20 per share; the market value of the stock was $32 per share at the time of purchase.Mindset's management was confident the land would be worth at least $64,000 to the company.
(4)The company purchased equipment under a deferred payment contract-- $40,000 down payment and 30 semiannual payments of $5,000.(Assume a 12 percent interest rate.)Determine the acquisition cost for each of the assets.

Accepted Answer

@#IMG-DLM& The $410 for normal repairs a

Question 17

Which of the following most accurately describes the position taken by generally accepted accounting principles regarding the accounting for the costs of drilling dry wells in the oil and gas industry?

Accepted Answer

A) Only the successful efforts method may be used. 
B) Only the full cost method may be used. 
C) Both the successful efforts and full-cost methods may be used. 
D) Neither the successful efforts method nor the full cost method may be used pending the development by the Securities and Exchange Commission of its own approach to accounting for the costs of drilling dry wells. 
A) Only the successful efforts method may be used. 
B) Only the full cost method may be used. 
C) Both the successful efforts and full-cost methods may be used. 
D) Neither the successful efforts method nor the full cost method may be used pending the development by the Securities and Exchange Commission of its own approach to accounting for the costs of drilling dry wells.

Question 18

Song Company started construction on a building on January 1 of this year and completed construction on December 31 of the same year.Song had only two interest notes outstanding during the year,and both of these notes were outstanding for all 12 months of the year.The following information is available:
 
What amount of interest should Song capitalize for the current year?

Accepted Answer

A) $15,000 
B) $18,000 
C) $22,500 
D) $27,900 
A) $15,000 
B) $18,000 
C) $22,500 
D) $27,900

Question 19

On October 1,Azuma,Inc.exchanged 8,000 shares of its $25 par value common stock for a parcel of land to be held for a future plant site.Azuma's common stock had a fair market value of $80 per share on the exchange date.Azuma received $36,000 from the sale of scrap when an existing building on the site was razed.The land should be carried at

Accepted Answer

A) $200,000. 
B) $236,000. 
C) $604,000. 
D) $640,000. 
A) $200,000. 
B) $236,000. 
C) $604,000. 
D) $640,000.

Question 20

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

Accepted Answer

A) expensed. 
B) debited to Accumulated Depreciation. 
C) capitalized in the machine account. 
D) allocated between Accumulated Depreciation and the machine account. 
A) expensed. 
B) debited to Accumulated Depreciation. 
C) capitalized in the machine account. 
D) allocated between Accumulated Depreciation and the machine account.

Which of the following ordinarily would be treated as a revenue expenditure rather than a capital expenditure?

Which of the following best describes the proper treatment of cash discounts on acquired machinery?

A company purchased land to be used as the site for the construction of a plant.Timber was cut from the building site so that construction of the plant could begin.The proceeds from the sale of the timber should be

If the cost of ordinary repairs is capitalized as an addition to the building account during the current year,

If a company constructs a laboratory building to be used as a research and development facility,the cost of the laboratory building is matched against earnings as

The following balances are from the records of the Summertime Outdoor Equipment Company : Prepare a partial balance sheet and income statement using the information provided above.

Which of the following is true?

The term "intangible assets" is used in accounting to denote

Which of the following most accurately describes the position taken by generally accepted accounting principles regarding the accounting for the costs of drilling dry wells in the oil and gas industry?

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

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll,pensions, Other Compissues

Earnings Per Share

Derivatives, contingencies, business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters

Exam 10: Investments in Noncurrent Operating Assets-Acquisition

Which of the following ordinarily would be treated as a revenue expenditure rather than a capital expenditure?

Which of the following best describes the proper treatment of cash discounts on acquired machinery?

A company purchased land to be used as the site for the construction of a plant.Timber was cut from the building site so that construction of the plant could begin.The proceeds from the sale of the timber should be

If the cost of ordinary repairs is capitalized as an addition to the building account during the current year,

If a company constructs a laboratory building to be used as a research and development facility,the cost of the laboratory building is matched against earnings as

The following balances are from the records of the Summertime Outdoor Equipment Company : Prepare a partial balance sheet and income statement using the information provided above.

Which of the following is true?

The term "intangible assets" is used in accounting to denote

Which of the following most accurately describes the position taken by generally accepted accounting principles regarding the accounting for the costs of drilling dry wells in the oil and gas industry?

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

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll,pensions, Other Compissues

Earnings Per Share

Derivatives, contingencies, business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters