Question 1

Runge Company purchased machinery on January 1 at a list price of $300,000, with credit terms 2/10, n/30.Payment was made within the discount period.Runge paid $15,000 sales tax on the machinery and paid installation charges of $5,300.Prior to installation, Runge paid $12,000 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 2

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

Accepted Answer

The cash needed to replace the plant asset is not a consideration when recording periodic depreciation expense on plant assets. Depreciation expense is calculated based on the cost, estimated useful life, and salvage value of the asset, but not on the cash needed to replace it.

Question 3

Rodgers Company purchased equipment and these costs were incurred:  Rodgers will record the acquisition cost of the equipment as

Accepted Answer

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

Question 4

Schrock Company purchases a new delivery van for $70,000.The sales taxes are $5,250.The logo of the company is painted on the side of the van for $1,400.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 cost of the van includes the purchase price, sales taxes, and costs necessary to prepare the van for use, such as painting the logo and safety testing. Therefore, the cost is $70,000 + $5,250 + $1,400 + $250 = $76,900. The annual license fee is not included in the cost of the van.

Question 5

Arnold Company purchases a new delivery truck for $45,000.The sales taxes are $2,500.The logo of the company is painted on the side of the truck for $1,200.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 truck includes the purchase price, sales taxes, and costs necessary to prepare the truck for use, such as painting the logo and safety testing. The license fee is not included. Therefore, $45,000 + $2,500 + $1,200 + $220 = $48,920.

Question 6

Ramirez Company acquires land for $240,000 cash.Additional costs are as follow.  Ramirez will record the acquisition cost of the land as

Accepted Answer

The answer of Ramirez Company acquires land for $240,000 cash.Additional...

Question 7

Wesley Hospital installs a new parking lot.The paving cost $60,000 and the lights to illuminate the new parking area cost $24,000.Which of the following statements is true with respect to these additions?

Accepted Answer

The paving and lighting are considered land improvements, which are separate from the land itself and should be debited to Land Improvements.

Question 8

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

Accepted Answer

Depreciation is the term used for the periodic allocation of the cost of a tangible plant asset over its useful life.

Question 9

The balance in the Accumulated Depreciation account represents the

Accepted Answer

Accumulated Depreciation represents the cumulative amount of depreciation expense charged to the plant asset since its acquisition. This balance is used to reduce the book value of the asset and indicate its age or wear and tear. It is not a cash fund and does not represent the fair market value of the asset.

Question 10

Carpino Company purchased equipment and these costs were incurred:  What amount should be recorded as the cost of the equipment?

Accepted Answer

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

Question 11

Kathy's Blooms purchased a delivery van with a $60,000 list price.The company was given a $6,000 cash discount by the dealer and paid $3,000 sales tax.Annual insurance on the van is $1,500.As a result of the purchase, by how much will Kathy's Blooms increase its van account?

Accepted Answer

The van account increases by the purchase price minus the cash discount plus sales tax: $60,000 - $6,000 + $3,000 = $57,000. Insurance is not included in the van account.

Question 12

Which of the following is not an advantage of leasing a long-term asset?

Accepted Answer

No depreciation is not an advantage of leasing a long-term asset.

Question 13

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, as it is directly attributable to the construction of the asset.

Question 14

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 15

Rains Company purchased equipment on January 1 at a list price of $125,000, with credit terms 2/10, n/30.Payment was made within the discount period.Rains paid $6,250 sales tax on the equipment and paid installation charges of $2,200.Prior to installation, Rains paid $5,000 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 discount is 2% of $125,000, which is $2,500. So, the purchase price after discount is $122,500. Adding the sales tax ($6,250), installation charges ($2,200), and concrete slab cost ($5,000), the total cost is $135,950.

Question 16

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 17

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

Accepted Answer

Interest incurred during construction is capitalized as part of the cost of constructing a building, as it is directly attributable to the construction process.

Question 18

Ryan, Inc.purchased a delivery truck with a $48,000 list price.The company was given a $4,800 cash discount by the dealer and paid $2,400 sales tax.Annual insurance on the truck is $1,200.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...

Question 19

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

Accepted Answer

Depreciation is allocated in a systematic and rational manner to match the expense with the revenue generated by the asset over its useful life.

Question 20

Land improvements should be depreciated over the useful life of the

Accepted Answer

Land improvements, such as sidewalks, driveways, and fences, are separate from the land itself and have a limited useful life. Therefore, they should be depreciated over their useful life, which is the duration of their expected usefulness, as opposed to the indefinite life of the land.

Quiz 9: Reporting and Analyzing Long-Lived Assets

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

Rodgers Company purchased equipment and these costs were incurred: Rodgers will record the acquisition cost of the equipment as