ACCT 2010 UNT EXAM 3 CHPT. 7, 8,9
WITH ACCURATE SOLUTIONS
Smatter Corporation purchased land for a new building. Which of the following costs
would not be included in the cost of the land? - ANS-Cost of new parking lot constructed
on the land
Chanit Company purchased a building and land for $540,000 in total. Individually, the
land appraised for
$228,000 and the building appraised for $342,000.
How much of the purchase price should be allocated to the cost of the land? - ANS-
$216,000
Suppose you buy land for $2,800,000
and spend $1,100,000 to develop the property. You then divide the land into lots as
follows:
15 Hilltop Lots ... $510,000
15 Valley Lots ... $240,000
How much did each Hilltop lot cost you? - ANS-$176,800
$510,000/($510,000+240,000)=68%
68% * (2,800,000+$1,100,00)/ 15 = $176,800
Whitmore Corporation purchased a new delivery van on the last day of its fiscal year.
The cost of the delivery van will appear on Whitmore's _______________ in the year of
purchase. - ANS-Balance sheet
When a company expenses the cost of maintenance for its heating and cooling system,
that cost will appear on its - ANS-Income statement
Capitalizing a cost involves increasing what type of account? - ANS-Asset
A capital expenditure - ANS-adds to an asset.
Smatter Corporation purchased land for a new building. Which of the following costs
would not be included in the cost of the land? - ANS-Cost of new parking lot constructed
on the land
Chanit Company purchased a building and land for $540,000 in total. Individually, the
land appraised for
$228,000 and the building appraised for $342,000.
,How much of the purchase price should be allocated to the cost of the land? - ANS-
$216,000
Suppose you buy land for $2,800,000
and spend $1,100,000 to develop the property. You then divide the land into lots as
follows:
15 Hilltop Lots ... $510,000
15 Valley Lots ... $240,000
How much did each Hilltop lot cost you? - ANS-$176,800
$510,000/($510,000+240,000)=68%
68% * (2,800,000+$1,100,00)/ 15 = $176,800
Whitmore Corporation purchased a new delivery van on the last day of its fiscal year.
The cost of the delivery van will appear on Whitmore's _______________ in the year of
purchase. - ANS-Balance sheet
When a company expenses the cost of maintenance for its heating and cooling system,
that cost will appear on its - ANS-Income statement
Capitalizing a cost involves increasing what type of account? - ANS-Asset
A capital expenditure - ANS-adds to an asset.
Which of the following items should be accounted for as a capital expenditure? - ANS-
Taxes paid in conjunction with the purchase of office equipment
Plant Master Company purchased a delivery van for $35,000 on January 1. The van
has an estimated
10-year life with a residual value of $6,000.
What would the depreciation expense for this van be in the first year if Plant
MasterPlant Master uses the straight-line method? - ANS-$2,900
$35,000-$6,000/10=$2,900
Brander Corporation purchased a forklift for $45,000
on July 1. The forklift has an estimated useful life of 25,000 usage hours with a residual
value of $4,000. BranderBranderuses the units-of-production method for depreciation. If
BranderBrander uses the forklift for 6,500 hours during the first year, the depreciation
expense on the forklift would be - ANS-$10,660
$45000-4000/25000=1.64
1.64 * 6500=10,660
On the first day of its fiscal year,
Spartan Company purchased a new computer system for a total cost of $80,000. The
computer system is expected to have a life of 55 years with a residual value of $6,500.
If the company uses the double-declining-balance method, its depreciation expense for
this computer system in the first year will be - ANS-$32,000
, (1/5)*2=.40
$80,000*.40=32,000
The depreciation method that does not initially use the residual value in depreciation
calculations is the - ANS-double-declining balance method.
Which statement about depreciation is false? - ANS-Depreciation should not be
recorded in years in which the market value of the asset has increased.
At the beginning of last year, Boxford Corporation purchased a piece of heavy
equipment for $38,000. The equipment has a life of five years or 100,000 hours. The
estimated residual value is $8,000. Bremond used the equipment for 25,000 hours last
year and 31,000 hours this year. Depreciation expense for year two using double-
declining-balance (DDB) and units-of-production (UOP) methods would be as follows: -
ANS-DDB: $9,120
UOP: $9,300
Houston Corporation acquired a machine for $32,000 and has recorded depreciation for
two years using the straight-line method over a five-year life and $8,000 residual value.
At the start of the third year of use, Houston revised the estimated useful life to a total of
10 years. Estimated residual value declined to $0.
How much depreciation should Houston record in each of the asset's last eight years
(that is, year 3 through year 10), following the revision? - ANS-$2,800
$32,000-$9,600/8=$2,800
Kline Company failed to record depreciation of equipment. How does this omission
affect Kline's financial statements? - ANS-Net income is overstated and assets are
overstated.
Acton, Inc., uses the double-declining-balance method for depreciation on its
computers. Which item is not needed to compute depreciation for the first year? - ANS-
Estimated residual value
Which of the following costs are reported on a company's income statement and
balance sheet? - ANS-Income Statement Balance Sheet
Cost of goods sold & Accumulated depreciation
Hamilton Company purchased a machine for $8,800 on January 1, 2016. The machine
has been depreciated using the straight-line method assuming it has a four-year life with
a $1,600 residual value. Hamilton sold the machine on January 1, 2018, for $8,200.
What is the book value of the machine on December 31, 2017? - ANS-$5,200
$8,800-1,600/4=1,800
1800 * 2 = 3600
8800-3600=5200
WITH ACCURATE SOLUTIONS
Smatter Corporation purchased land for a new building. Which of the following costs
would not be included in the cost of the land? - ANS-Cost of new parking lot constructed
on the land
Chanit Company purchased a building and land for $540,000 in total. Individually, the
land appraised for
$228,000 and the building appraised for $342,000.
How much of the purchase price should be allocated to the cost of the land? - ANS-
$216,000
Suppose you buy land for $2,800,000
and spend $1,100,000 to develop the property. You then divide the land into lots as
follows:
15 Hilltop Lots ... $510,000
15 Valley Lots ... $240,000
How much did each Hilltop lot cost you? - ANS-$176,800
$510,000/($510,000+240,000)=68%
68% * (2,800,000+$1,100,00)/ 15 = $176,800
Whitmore Corporation purchased a new delivery van on the last day of its fiscal year.
The cost of the delivery van will appear on Whitmore's _______________ in the year of
purchase. - ANS-Balance sheet
When a company expenses the cost of maintenance for its heating and cooling system,
that cost will appear on its - ANS-Income statement
Capitalizing a cost involves increasing what type of account? - ANS-Asset
A capital expenditure - ANS-adds to an asset.
Smatter Corporation purchased land for a new building. Which of the following costs
would not be included in the cost of the land? - ANS-Cost of new parking lot constructed
on the land
Chanit Company purchased a building and land for $540,000 in total. Individually, the
land appraised for
$228,000 and the building appraised for $342,000.
,How much of the purchase price should be allocated to the cost of the land? - ANS-
$216,000
Suppose you buy land for $2,800,000
and spend $1,100,000 to develop the property. You then divide the land into lots as
follows:
15 Hilltop Lots ... $510,000
15 Valley Lots ... $240,000
How much did each Hilltop lot cost you? - ANS-$176,800
$510,000/($510,000+240,000)=68%
68% * (2,800,000+$1,100,00)/ 15 = $176,800
Whitmore Corporation purchased a new delivery van on the last day of its fiscal year.
The cost of the delivery van will appear on Whitmore's _______________ in the year of
purchase. - ANS-Balance sheet
When a company expenses the cost of maintenance for its heating and cooling system,
that cost will appear on its - ANS-Income statement
Capitalizing a cost involves increasing what type of account? - ANS-Asset
A capital expenditure - ANS-adds to an asset.
Which of the following items should be accounted for as a capital expenditure? - ANS-
Taxes paid in conjunction with the purchase of office equipment
Plant Master Company purchased a delivery van for $35,000 on January 1. The van
has an estimated
10-year life with a residual value of $6,000.
What would the depreciation expense for this van be in the first year if Plant
MasterPlant Master uses the straight-line method? - ANS-$2,900
$35,000-$6,000/10=$2,900
Brander Corporation purchased a forklift for $45,000
on July 1. The forklift has an estimated useful life of 25,000 usage hours with a residual
value of $4,000. BranderBranderuses the units-of-production method for depreciation. If
BranderBrander uses the forklift for 6,500 hours during the first year, the depreciation
expense on the forklift would be - ANS-$10,660
$45000-4000/25000=1.64
1.64 * 6500=10,660
On the first day of its fiscal year,
Spartan Company purchased a new computer system for a total cost of $80,000. The
computer system is expected to have a life of 55 years with a residual value of $6,500.
If the company uses the double-declining-balance method, its depreciation expense for
this computer system in the first year will be - ANS-$32,000
, (1/5)*2=.40
$80,000*.40=32,000
The depreciation method that does not initially use the residual value in depreciation
calculations is the - ANS-double-declining balance method.
Which statement about depreciation is false? - ANS-Depreciation should not be
recorded in years in which the market value of the asset has increased.
At the beginning of last year, Boxford Corporation purchased a piece of heavy
equipment for $38,000. The equipment has a life of five years or 100,000 hours. The
estimated residual value is $8,000. Bremond used the equipment for 25,000 hours last
year and 31,000 hours this year. Depreciation expense for year two using double-
declining-balance (DDB) and units-of-production (UOP) methods would be as follows: -
ANS-DDB: $9,120
UOP: $9,300
Houston Corporation acquired a machine for $32,000 and has recorded depreciation for
two years using the straight-line method over a five-year life and $8,000 residual value.
At the start of the third year of use, Houston revised the estimated useful life to a total of
10 years. Estimated residual value declined to $0.
How much depreciation should Houston record in each of the asset's last eight years
(that is, year 3 through year 10), following the revision? - ANS-$2,800
$32,000-$9,600/8=$2,800
Kline Company failed to record depreciation of equipment. How does this omission
affect Kline's financial statements? - ANS-Net income is overstated and assets are
overstated.
Acton, Inc., uses the double-declining-balance method for depreciation on its
computers. Which item is not needed to compute depreciation for the first year? - ANS-
Estimated residual value
Which of the following costs are reported on a company's income statement and
balance sheet? - ANS-Income Statement Balance Sheet
Cost of goods sold & Accumulated depreciation
Hamilton Company purchased a machine for $8,800 on January 1, 2016. The machine
has been depreciated using the straight-line method assuming it has a four-year life with
a $1,600 residual value. Hamilton sold the machine on January 1, 2018, for $8,200.
What is the book value of the machine on December 31, 2017? - ANS-$5,200
$8,800-1,600/4=1,800
1800 * 2 = 3600
8800-3600=5200
