KAT 301 EXAM 1 UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
Question:
1. A characteristic of a plant asset is that it is
A) intangible
B) used in the operation of a business
C) held for sale in the ordinary course of the business
D) not currently used in the business but held for future use
Answer:
B) used in the operation of a business
Question:
2. Which of the following assets does NOT decline in service potential over the course of its useful life?
A) Equipment
B) Furnishing
C) Land
D) Fixture
Answer:
C) Land
Question:
3. Stories Company purchased equipment and these costs were incurred:
Cash price $22,500 Sales taxes 1,800 Insurance during transit 320 Installation and testing 430 Total costs.
$25,050
Stories will record the acquisition cost of the equipment as
A) $22,500 B) $24,300 C) $24,620 D) $25,050
Answer:
D) $25,050
Question:
4. All leases are classified as either
A) capital leases or long-term leases.
B) capital leases or operating leases.
C) operating leases or current leases.
D) long-term leases or current leases.
Answer:
B) capital leases or operating leases.
Question:
5. The cost of a long-term asset is expensed
A) when it is paid for.
B) as the asset benefits the company.
C) in the period in which it is acquired.
D) in the period in which it is disposed of.
, Answer:
B) as the asset benefits the company
Question:
6. The book value of an asset is equal to the
A) asset's market value less its historical cost.
B) blue book value relied on by secondary markets.
C) replacement cost of the asset.
D) asset's cost less accumulated depreciation.
Answer:
D) asset's cost less accumulated depreciation.
Question:
7. Recording depreciation each period is necessary in accordance with the
A) going concern principle.
B) cost principle.
C) matching principle.
D) asset valuation principle.
Answer:
C) matching principle
Question:
8. The depreciation method that applies a constant percentage to depreciable cost in calculating
depreciation is
A) straight-line.
B) units-of-activity.
C) sum-of-year's-digits.
D) none of these.
Answer:
A) straight-line.
Question:
9. Use the following to answer questions 9-11:
Brinkman Corporation bought equipment on January 1, 2007. The equipment cost $90,000 and had an
expected salvage value of $15,000. The life of the equipment was estimated to be 6 years.
The depreciable cost of the equipment is
A) $90,000 B) $75,000 C) $50,000 D) $12,500
Answer:
B) $75,000
Question:
10. Use the following to answer questions 9-11:
Brinkman Corporation bought equipment on January 1, 2007. The equipment cost $90,000 and had an
expected salvage value of $15,000. The life of the equipment was estimated to be 6 years.
The depreciation expense using the straight-line method of depreciation is
A) $17,500. B) $18,000 C) $12,500 D) none of the above
CORRECT ANSWERS
Question:
1. A characteristic of a plant asset is that it is
A) intangible
B) used in the operation of a business
C) held for sale in the ordinary course of the business
D) not currently used in the business but held for future use
Answer:
B) used in the operation of a business
Question:
2. Which of the following assets does NOT decline in service potential over the course of its useful life?
A) Equipment
B) Furnishing
C) Land
D) Fixture
Answer:
C) Land
Question:
3. Stories Company purchased equipment and these costs were incurred:
Cash price $22,500 Sales taxes 1,800 Insurance during transit 320 Installation and testing 430 Total costs.
$25,050
Stories will record the acquisition cost of the equipment as
A) $22,500 B) $24,300 C) $24,620 D) $25,050
Answer:
D) $25,050
Question:
4. All leases are classified as either
A) capital leases or long-term leases.
B) capital leases or operating leases.
C) operating leases or current leases.
D) long-term leases or current leases.
Answer:
B) capital leases or operating leases.
Question:
5. The cost of a long-term asset is expensed
A) when it is paid for.
B) as the asset benefits the company.
C) in the period in which it is acquired.
D) in the period in which it is disposed of.
, Answer:
B) as the asset benefits the company
Question:
6. The book value of an asset is equal to the
A) asset's market value less its historical cost.
B) blue book value relied on by secondary markets.
C) replacement cost of the asset.
D) asset's cost less accumulated depreciation.
Answer:
D) asset's cost less accumulated depreciation.
Question:
7. Recording depreciation each period is necessary in accordance with the
A) going concern principle.
B) cost principle.
C) matching principle.
D) asset valuation principle.
Answer:
C) matching principle
Question:
8. The depreciation method that applies a constant percentage to depreciable cost in calculating
depreciation is
A) straight-line.
B) units-of-activity.
C) sum-of-year's-digits.
D) none of these.
Answer:
A) straight-line.
Question:
9. Use the following to answer questions 9-11:
Brinkman Corporation bought equipment on January 1, 2007. The equipment cost $90,000 and had an
expected salvage value of $15,000. The life of the equipment was estimated to be 6 years.
The depreciable cost of the equipment is
A) $90,000 B) $75,000 C) $50,000 D) $12,500
Answer:
B) $75,000
Question:
10. Use the following to answer questions 9-11:
Brinkman Corporation bought equipment on January 1, 2007. The equipment cost $90,000 and had an
expected salvage value of $15,000. The life of the equipment was estimated to be 6 years.
The depreciation expense using the straight-line method of depreciation is
A) $17,500. B) $18,000 C) $12,500 D) none of the above
