Question 1

The lump-sum amount paid for a group of assets is divided among the acquired assets based on their relative market values.

Accepted Answer

This method of allocation is called the market value allocation method.

Question 2

Which of the following is NOT included as furniture and fixtures?

Accepted Answer

Computers are considered equipment rather than furniture and fixtures.

Question 3

Brentwood Auto Repair purchased a new machine and placed it in service on June 14.Which of the following is NOT included in the cost of equipment?

Accepted Answer

The answer of Brentwood Auto Repair purchased a new machine...

Question 4

Which of the following is NOT recorded as the cost of a building?

Accepted Answer

Fencing is a land improvement.

Question 5

The cost paid to a laborer to assemble a desk is recorded as an expense.

Accepted Answer

The cost paid to a laborer to assemble a desk is recorded as part of the asset,furniture.

Question 6

After a machine is installed and is up and running,repairs and maintenance are recorded as part of the cost of the machine.

Accepted Answer

After a machine is installed and is up and running,repairs and maintenance are recorded as expenses.

Question 7

The cost of furniture and fixtures includes all costs to ready the asset for its intended use.

Accepted Answer

The cost of furniture and fixtures includes all costs associated with readying the asset for its intended use, such as installation, assembly, and any necessary modifications or repairs. This means that the cost of furniture and fixtures can include shipping and handling fees, labor costs for installation, and any additional materials needed to prepare the asset for use.

Question 8

An expenditure that increases the capacity or efficiency of a plant asset or that extends the asset's life is known as a revenue expenditure.

Accepted Answer

An expenditure that increases the capacity or efficiency of a plant asset or that extends the asset's life is known as a capital expenditure.

Question 9

When constructing a building for plant operations,payments for materials,labor,and miscellaneous costs are recorded as expenses.

Accepted Answer

When constructing a building for plant operations,the cost for materials,labor,and miscellaneous costs are recorded as part of the cost of the building.

Question 10

If a minor repair was incorrectly debited to the asset account,expenses and net income would be understated.

Accepted Answer

If a minor repair was incorrectly debited to the asset account,expenses and net income would be understated and net income would be overstated.

Question 11

Millburn Company has acquired a property that included both land and a building for $530,000.The company hired an appraiser who has determined that the market value of the land is $320,000 and that of the building is $480,000.At what amount should the company record the cost of land? (Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar. )

Accepted Answer

Land percentage of total value = 320,000 / (320,000 + 480,000)= 0.40
Cost of land = Lump-sum purchase price × Land percentage of total value = $530,000 × 0.40 = $212,000

Question 12

Great Plains Company has acquired a property that included both land and a building for $500,000.The company paid cash.The company hired an appraiser who has determined that the market value of the land is $300,000 and that of the building is $400,000.Journalize the lump-sum purchase.Omit explanation.(Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar. )

Accepted Answer

The answer of Great Plains Company has acquired a property...

Question 13

Anderson Company has purchased a group of assets for $23,800.The assets and their relative market values are listed below.  Which of the following amounts would be debited to the Land account? (Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar. )

Accepted Answer

Cost of land = Lump-sum purchase price × [Land / (Land + Equipment + Building)] =
$23,800 ×[ $7200 / ($7200 + $2100 + $3300)] = $13,566

Question 14

A lump-sum purchase or basket purchase involves paying a single price for several assets as a group.

Accepted Answer

A lump-sum purchase or basket purchase refers to the purchase of a group of assets for a single price, rather than purchasing each asset individually. This can be advantageous for the buyer in terms of negotiating a better overall price and simplifying the purchase process.

Question 15

Danube Company purchased a used machine for $12,000.The machine required installation costs of $3000 and insurance while in transit of $1500.At which of the following amounts would the machine be recorded?

Accepted Answer

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Question 16

Repair work that generates a capital expenditure because it extends a plant asset's useful life past the normal expected life is known as an extraordinary repair.

Accepted Answer

An extraordinary repair is one that extends the useful life of a plant asset beyond its expected life and generates a capital expenditure. Therefore, the statement is true.

Question 17

Laramie Company has acquired a property that included both land and a building for $500,000.The company hired an appraiser who has determined that the market value of the land is $300,000 and that of the building is $480,000.At what amount should the company record the cost of the building? (Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar. )

Accepted Answer

Building percentage of total value = 480,000 / (300,000 + 480,000)= 0.62
Cost of building = Lump-sum purchase price × Building percentage of total value =
$500,000 × 0.62 = $310,000

Question 18

For each of the following amounts paid by a purchaser,determine whether the amount is debited to Land,Land Improvements,or Building.

Accepted Answer

The answer of For each of the following amounts paid...

Question 19

Ordinary repairs to plant assets are referred to as revenue expenditures.

Accepted Answer

Ordinary repairs to plant assets are considered as revenue expenditures because they maintain or restore the original condition or functionality of the asset. They do not increase the asset's useful life or improve its productive capabilities.

Question 20

Installation costs are recorded as part of the cost of equipment.

Accepted Answer

Installation costs are considered to be part of the cost of equipment and are included in the purchase price.

Quiz 10: Plant Assets, natural Resources, and Intangibles