Question 1

Which of the following assets does not decline in service potential over the course of its useful life?

Accepted Answer

Land does not depreciate because it does not wear out, become obsolete, or get used up over time like other tangible assets.

Question 2

The Land account would include all of the following costs except

Accepted Answer

The answer of The Land account would include all of...

Question 3

Which of the following should not be classified as property, plant and equipment?

Accepted Answer

A truck held for resale by an automobile dealership is not classified as property, plant and equipment because it is held for sale in the ordinary course of business.

Question 4

A company purchased land for $120,000 cash; $7,000 was spent to demolish an old building on the land before construction of a new building could start; and $1,500 was received for material salvaged from the old building. The cost of the land would be recorded at

Accepted Answer

The cost of the land includes the purchase price plus any costs necessary to prepare the land for its intended use. Therefore, the cost is $120,000 (purchase price) + $7,000 (demolition) - $1,500 (salvaged materials) = $125,500.

Question 5

The expected costs to retire an asset are called

Accepted Answer

Asset retirement costs refer to the expected costs associated with retiring an asset, including dismantling, removal, and site restoration.

Question 6

Which one of the following items is not considered to be a part of the cost of a truck purchased for business use?

Accepted Answer

The motor vehicle licence is a recurring expense related to the operation of the truck, not a capital cost associated with acquiring the truck.

Question 7

Enmerick Corporation purchases a new delivery truck for $45,000. The company logo is painted on the side of the truck for $1,500. The motor vehicle licence is $175. Annual insurance is $1,500. At what amount does Enmerick record the cost of the new truck?

Accepted Answer

The cost of the truck includes the purchase price and any costs necessary to prepare it for use, such as the logo painting. Therefore, the cost is $45,000 + $1,500 = $46,500. The motor vehicle license and insurance are not included in the capitalized cost.

Question 8

The carrying amount of an asset is the original cost less anticipated residual value.

Accepted Answer

The carrying amount of an asset is the original cost less accumulated depreciation and any accumulated impairment losses, not just the anticipated residual value.

Question 9

Land improvements should be depreciated over the useful life of the

Accepted Answer

Land improvements should be depreciated over their useful life, which may include things like walkways, patios, fences, or landscaping. Depreciating land itself isn't necessary because it doesn't wear out or become obsolete, and it has an infinite useful life.

Question 10

Angus Corp. acquires land for $105,000 cash. Additional costs are as follows:  Angus will record the cost of the land as

Accepted Answer

The answer of Angus Corp. acquires land for $105,000 cash....

Question 11

Interest incurred on the construction of a building can be included in the cost of the building

Accepted Answer

Interest incurred during the construction period of a building can be capitalized and included in the cost of the building, as it is considered part of the cost necessary to bring the asset to its intended use.

Question 12

Harmon Medical Ltd. purchases land for $290,500 cash. The title and legal fees totalled $1,500. The clinic has the land graded for $25,000. What amount does Harmon Medical record as the cost for the land?

Accepted Answer

The cost of land includes the purchase price, title and legal fees, and any costs to prepare the land for use. Therefore, the total cost is $290,500 (purchase price) + $1,500 (title and legal fees) + $25,000 (grading) = $317,000.

Question 13

Asset retirement costs are

Accepted Answer

Asset retirement costs are added to the cost of a depreciable asset because they are considered part of the total cost necessary to bring the asset to its intended use.

Question 14

A characteristic of property, plant, and equipment is that it is

Accepted Answer

Property, plant, and equipment are tangible assets used in the operations of a business to generate revenue.

Question 15

Which of the following is not true for an operating expenditure?

Accepted Answer

Operating expenditures are recorded as expenses on the income statement, not as debits to a statement of financial position account, which typically involves assets or liabilities.

Question 16

Which of the following would not be included in the Equipment account?

Accepted Answer

Electricity used by the machine is an operating expense and not part of the capitalized cost of the equipment.

Question 17

Aye Corp. purchases a remote-site building for computer operations. The building will be suitable for operations after some necessary expenditures. The wiring must be replaced to handle the computer specifications. The roof is leaking and must be replaced. All rooms must be repainted and re-carpeted and there will also be some updating of the plumbing needed. Which of the following statements is true?

Accepted Answer

The cost of the building will include the cost of replacing the roof because it is necessary to make the building suitable for its intended use.

Question 18

Which of the following is not an advantage of an operating lease?

Accepted Answer

Operating leases do not offer accelerated depreciation benefits; this is typically associated with owning an asset.

Question 19

Mercy General Hospital installs a new parking lot. The paving cost $25,000 and the lights to illuminate the new parking lot cost $13,000. Which of the following statements is true with respect to these expenditures?

Accepted Answer

The costs for paving and lighting are improvements to the land, not the land itself, and should be recorded as Land Improvements.

Question 20

The cost of land does not include

Accepted Answer

The answer of The cost of land does not include
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Quiz 9: Reporting and Analyzing Long-Lived Assets