WSU Accounting 230 Exam 3 Questions And
Complete Solutions
What is included in Plant, Property, and Equipment? - Correct Answer Land, land
improvements, buildings, equipment, and natural resources.
What does the term "capitalize" mean? - Correct Answer Recording an expenditure as
an asset if it increases future benefits; if it only increase benefits during the current
period then we label it as an expense.
What is included in the value of a long-term asset to record on the balance sheet? -
Correct Answer The long term asset at its cost, plus all expenditures necessary to
prepare the asset for use.
When purchasing land, how do you calculate the amount to be recorded? - Correct
Answer Purchase price of land, commissions, back property taxes, title insurance, cost
of removing an existing building, cost of leveling the land, less: salvaged materials.
If $8,000 ($6,000 in back taxes and $2,000 due for the current fiscal year) in Property
Taxes are paid on a price of land after purchase, what amount is included in the total
cost of the land? - Correct Answer $6,000.
Are land improvements recorded with land? - Correct Answer No; since land
improvements (sprinklers, sidewalks, driveway, etc.) do not last forever, they are not
included.
What is a basket purchase? - Correct Answer The purchase of more than one asset at
the same time for a single purchase price.
How do you determine the value of individual accounts from a basket purchase? -
Correct Answer Estimated Fair Value x Allocation Percentage x Basket Purchase Cost
= Recorded Amount
What are types of Intangible Assets? - Correct Answer Copyrights, patents, franchises,
trademarks, and goodwill.
How can companies acquire Intangible Assets (2 different ways)? - Correct Answer 1.
Purchase Intangible Assets from other companies.
2. Develop Intangible Assets internally.
How do you record/value Intangible Assets that are purchased from other companies to
record? - Correct Answer The original cost plus all other costs (such as legal fees)
necessary to prepare the asset for use; recorded under assets.
How do you record Intangible Assets that are developed internally? - Correct Answer
Expense the costs for developing the intangible asset as you incur the costs.
, What expenditures are *capitalized* after the acquisition of an asset? - Correct Answer
Additions, improvements (replacements), major repairs that increase future benefits,
and legal defense of intangible assets.
What expenditures are *expensed* after the acquisition of an asset? - Correct Answer
Routine repairs and maintenance.
How are research and development costs recorded? - Correct Answer Expensed as
they are incurred.
What type of account is Accumulated Depreciation? - Correct Answer A contra-asset
account.
Journalize annual depreciation cost. - Correct Answer Debit: Depreciation Expense
Credit: Accumulated Depreciation
How do you calculate annual depreciation expense? - Correct Answer (Asset's Cost -
Residual Value) / Service Life
Which intangible assets are subject to amortization? - Correct Answer Patents,
copyrights, trademarks, and franchises.
Which intangible assets are not subject to amortization? - Correct Answer Goodwill
and trademarks.
How do you calculate the gain or loss on the disposal (sale, retirement, exchange) of an
asset? - Correct Answer Sale Amount - Book Value (Book Value = Original Cost -
Accumulate Depreciation) = Gain or Loss
Journalize a gain on the sale of equipment. - Correct Answer Debit: Cash
Debit: Accumulated Depreciation
Credit: Equipment
Credit: Gain
Journalize a loss on the sale of equipment. - Correct Answer Debit: Cash
Debit: Accumulated Depreciation
Debit: Loss
Credit: Equipment
Journalize a loss on the retirement of equipment. - Correct Answer Debit: Accumulated
Depreciation
Debit: Loss
Credit: Equipment
Complete Solutions
What is included in Plant, Property, and Equipment? - Correct Answer Land, land
improvements, buildings, equipment, and natural resources.
What does the term "capitalize" mean? - Correct Answer Recording an expenditure as
an asset if it increases future benefits; if it only increase benefits during the current
period then we label it as an expense.
What is included in the value of a long-term asset to record on the balance sheet? -
Correct Answer The long term asset at its cost, plus all expenditures necessary to
prepare the asset for use.
When purchasing land, how do you calculate the amount to be recorded? - Correct
Answer Purchase price of land, commissions, back property taxes, title insurance, cost
of removing an existing building, cost of leveling the land, less: salvaged materials.
If $8,000 ($6,000 in back taxes and $2,000 due for the current fiscal year) in Property
Taxes are paid on a price of land after purchase, what amount is included in the total
cost of the land? - Correct Answer $6,000.
Are land improvements recorded with land? - Correct Answer No; since land
improvements (sprinklers, sidewalks, driveway, etc.) do not last forever, they are not
included.
What is a basket purchase? - Correct Answer The purchase of more than one asset at
the same time for a single purchase price.
How do you determine the value of individual accounts from a basket purchase? -
Correct Answer Estimated Fair Value x Allocation Percentage x Basket Purchase Cost
= Recorded Amount
What are types of Intangible Assets? - Correct Answer Copyrights, patents, franchises,
trademarks, and goodwill.
How can companies acquire Intangible Assets (2 different ways)? - Correct Answer 1.
Purchase Intangible Assets from other companies.
2. Develop Intangible Assets internally.
How do you record/value Intangible Assets that are purchased from other companies to
record? - Correct Answer The original cost plus all other costs (such as legal fees)
necessary to prepare the asset for use; recorded under assets.
How do you record Intangible Assets that are developed internally? - Correct Answer
Expense the costs for developing the intangible asset as you incur the costs.
, What expenditures are *capitalized* after the acquisition of an asset? - Correct Answer
Additions, improvements (replacements), major repairs that increase future benefits,
and legal defense of intangible assets.
What expenditures are *expensed* after the acquisition of an asset? - Correct Answer
Routine repairs and maintenance.
How are research and development costs recorded? - Correct Answer Expensed as
they are incurred.
What type of account is Accumulated Depreciation? - Correct Answer A contra-asset
account.
Journalize annual depreciation cost. - Correct Answer Debit: Depreciation Expense
Credit: Accumulated Depreciation
How do you calculate annual depreciation expense? - Correct Answer (Asset's Cost -
Residual Value) / Service Life
Which intangible assets are subject to amortization? - Correct Answer Patents,
copyrights, trademarks, and franchises.
Which intangible assets are not subject to amortization? - Correct Answer Goodwill
and trademarks.
How do you calculate the gain or loss on the disposal (sale, retirement, exchange) of an
asset? - Correct Answer Sale Amount - Book Value (Book Value = Original Cost -
Accumulate Depreciation) = Gain or Loss
Journalize a gain on the sale of equipment. - Correct Answer Debit: Cash
Debit: Accumulated Depreciation
Credit: Equipment
Credit: Gain
Journalize a loss on the sale of equipment. - Correct Answer Debit: Cash
Debit: Accumulated Depreciation
Debit: Loss
Credit: Equipment
Journalize a loss on the retirement of equipment. - Correct Answer Debit: Accumulated
Depreciation
Debit: Loss
Credit: Equipment
