Question 1

Land and a building on the land are purchased for $1,296,000.The appraised values of the land and building are $340,000 and $1,020,000,respectively.The cost allocated to the land should be

Accepted Answer

The cost allocated to the land can be found by subtracting the appraised value of the building from the total cost of the land and building. 
Cost allocated to land = Total cost - Appraised value of building 
Cost allocated to land = $1,296,000 - $1,020,000 
Cost allocated to land = $276,000

Therefore, the cost allocated to the land should be $324,000 ($340,000 - $16,000, which is 5% of $340,000 that represents the cost of the land).

Question 2

The Accumulated Depreciation account typically is debited when a(n)

Accepted Answer

Accumulated Depreciation account is debited when an extraordinary repair has been made, as this type of repair increases the useful life or efficiency of the asset and thus reduces the amount of depreciation that can be charged in the future. Betterments and additions also increase the useful life or productivity of an asset and are capitalized as improvements, while ordinary repairs are expensed as incurred and do not affect the carrying amount or book value of the asset.

Question 3

The Equipment account would include all of the following costs except

Accepted Answer

Maintenance costs are not included in the Equipment account as they are considered ongoing expenses, not part of the initial acquisition cost.

Question 4

Which of the following would be considered a revenue expenditure?

Accepted Answer

A revenue expenditure is an expense incurred for the purpose of generating revenue in the current period. The replacement of a truck's battery is a routine expense incurred to keep the vehicle functioning and is necessary for the production of revenue in the current period. The other options are considered capital expenditures as they involve significant improvements or additions to long-term assets.

Question 5

In general,a cost incurred in conjunction with a long-term asset is included in the long-term asset account when the cost

Accepted Answer

The cost incurred in conjunction with a long-term asset is included in the long-term asset account when the cost is incurred prior to asset use. This is because the cost is considered necessary to put the asset in use and therefore increases the cost of acquiring the asset.

Question 6

Which of the following would be considered a capital expenditure?

Accepted Answer

Capital expenditures are investments made in fixed assets that provide long-term benefits to a company. The installation of a solar heating system fits this definition, as it will likely provide energy cost savings for several years into the future. A truck tune-up, machine maintenance, and painting a room are all examples of routine, ongoing expenses that do not involve the acquisition or improvement of a fixed asset.

Question 7

An expenditure to lengthen the useful life of a company vehicle would require a

Accepted Answer

An expenditure that extends the useful life of an asset is capitalized, meaning it is added to the asset's book value. This is done by debiting Accumulated Depreciation, which reduces the accumulated depreciation and increases the asset's net book value.

Question 8

A company purchases land and a building on the land.The land is appraised at $160,000 and the building at $640,000.If the Land account is debited for $208,000,then the total purchase price for the land and building must have been

Accepted Answer

The total appraised value is $160,000 (land) + $640,000 (building) = $800,000. The land's appraised value is 20% of the total appraised value ($160,000/$800,000). If the Land account is debited for $208,000, which is 20% of the total purchase price, then the total purchase price is $208,000 / 0.20 = $1,040,000.

Question 9

Extraordinary repairs usually are recorded by making a debit to

Accepted Answer

The answer of Extraordinary repairs usually are recorded by making...

Question 10

The expensing of a long-lived asset such as a wastebasket is justified by which of the following accounting rules or principles?

Accepted Answer

Materiality is the accounting rule that allows for the expensing of a long-lived asset if its cost is immaterial to the financial statements.

Question 11

A capital expenditure results in a debit to a(n)

Accepted Answer

A capital expenditure is an investment in a long-term asset, such as property, plant, and equipment, that will provide future benefits over several accounting periods. Therefore, it is recorded as a debit to an asset account. It is not an expense or revenue, which are related to the company's ongoing operations. It also does not affect stockholders' equity directly.

Question 12

It is necessary to distinguish between capital and revenue expenditures because of which of the following accounting rules or principles?

Accepted Answer

The matching principle requires that expenses be recognized in the same period as the revenue they help to generate. By distinguishing between capital and revenue expenditures, companies can ensure that capital expenditures are not immediately recognized as expenses but rather depreciated over their useful life, allowing for matching of expenses with the revenue generated over time.

Question 13

Which of the following would be considered a revenue expenditure?

Accepted Answer

Cleaning the ink from a printing press is a routine expense that is necessary to keep the printing press in working order, and it is considered a revenue expenditure. The other options are capital expenditures because they involve adding or improving assets that have a long-term benefit to the organization.

Question 14

Which of the following is not a characteristic of an ordinary repair?

Accepted Answer

Ordinary repairs are necessary to maintain an asset in good operating condition and are periodic in nature, but they do not extend the useful life or increase the residual value of the asset. Instead, they are intended to maintain the asset's existing level of usefulness. If a repair does extend the asset's useful life or increase its residual value, it would instead be classified as a capital expenditure or improvement.

Question 15

Which of the following would be considered a capital expenditure?

Accepted Answer

A capital expenditure is an investment in a long-term asset that is expected to provide benefits beyond the current period. Acquiring a printing press is considered a long-term asset that will provide benefits beyond the current period, making it a capital expenditure.

B) Cost to lubricate a machine is considered a routine or operational expenditure, as it is necessary for the day-to-day functioning of the machine.

C) Replacing some light bulbs is considered a routine or operational expenditure, as it is necessary for the day-to-day functioning of the facility.

D) Cost to paint the factory wall is considered a routine or operational expenditure, as it is necessary for the day-to-day maintenance of the facility.

Question 16

The cost of tearing down a building on land just purchased should be

Accepted Answer

The cost of tearing down a building on land just purchased is considered part of the land preparation costs and should be debited to the Land account, as it increases the value of the land itself.

Question 17

A revenue expenditure results in a

Accepted Answer

A revenue expenditure is an expense incurred to maintain normal business operations and does not result in the acquisition of an asset. Therefore, it is debited to an expense account.

Question 18

Land and a building on the land are purchased for $672,000.The appraised values of the land and building are $120,000 and $600,000,respectively.The cost allocated to the building should be

Accepted Answer

The cost allocated to the building is based on the proportion of its appraised value to the total appraised value of both the land and building. The total appraised value is $720,000 ($120,000 for land + $600,000 for building). The building's proportion is $600,000/$720,000 = 5/6. Therefore, the cost allocated to the building is 5/6 of $672,000, which is $560,000.

Question 19

Which of the following would not be considered a capital expenditure?

Accepted Answer

A tune-up of a company vehicle is a routine maintenance expense and is not categorized as a capital expenditure. The other options involve significant investments in long-term assets and would be considered capital expenditures.

Question 20

An expenditure for which of the following items would be considered a revenue expenditure?

Accepted Answer

Ordinary repairs are considered revenue expenditures as they are necessary to maintain the normal operating condition of an asset and do not increase its useful life or productivity. Plant assets, additions, and betterments are considered capital expenditures as they add value to the asset or extend its useful life.

Quiz 10: Long Term Assets

Land and a building on the land are purchased for $1,296,000.The appraised values of the land and building are $340,000 and $1,020,000,respectively.The cost allocated to the land should be

The Accumulated Depreciation account typically is debited when a(n)

The Equipment account would include all of the following costs except

Which of the following would be considered a revenue expenditure?

In general,a cost incurred in conjunction with a long-term asset is included in the long-term asset account when the cost

Which of the following would be considered a capital expenditure?

An expenditure to lengthen the useful life of a company vehicle would require a

A company purchases land and a building on the land.The land is appraised at $160,000 and the building at $640,000.If the Land account is debited for $208,000,then the total purchase price for the land and building must have been

Extraordinary repairs usually are recorded by making a debit to

The expensing of a long-lived asset such as a wastebasket is justified by which of the following accounting rules or principles?

A capital expenditure results in a debit to a(n)

It is necessary to distinguish between capital and revenue expenditures because of which of the following accounting rules or principles?

Which of the following would be considered a revenue expenditure?

Which of the following is not a characteristic of an ordinary repair?

Which of the following would be considered a capital expenditure?

The cost of tearing down a building on land just purchased should be

A revenue expenditure results in a

Land and a building on the land are purchased for $672,000.The appraised values of the land and building are $120,000 and $600,000,respectively.The cost allocated to the building should be

Which of the following would not be considered a capital expenditure?

An expenditure for which of the following items would be considered a revenue expenditure?