ACC201 Chapter 9 Learning Notes
UPDATED ACTUAL Exam Questions and
CORRECT Answers
PPE (also known as plant assets) should be recorded on a company's financial statements at
____. (LN1) - CORRECT ANSWER -Historical cost (LN1)
Write-down from historical cost if the asset's value is impaired
PPE ____ (may, may not) be increased to fair value after it is originally recorded on a company's
books. - CORRECT ANSWER -may not; do NOT increase the asset above historical cost
Capital Expenditure (LN2) - CORRECT ANSWER -Will increase a company's total
assets, but will not affect a company's net income
An asset account will be debited when recording a capital expenditure
(ex: truck, equipment, land, building)
Revenue Expenditure (LN2) - CORRECT ANSWER -Will increase a company's total
expenses. Therefore will decrease a company's net income
(ex: window washing, painting a room, lawn mowing, oil change of a truck)
To capitalize an expenditure means to record the expenditure as a/an _____ on a company's
books - CORRECT ANSWER -asset
What are the primary types of expenditures that would be included in the cost of land? -
CORRECT ANSWER -Purchase price
Closing costs -- for example, attorney's fees
Real estate commissions
Property taxes -- from previous years
, (current property taxes will be expensed)
Razed - CORRECT ANSWER -tore down
Slide 20 on 3/27 PP Example - CORRECT ANSWER -Review this slide
- The cost of tearing down the barn will be added to the cost of the land
- The proceeds from the sale of the barn wood will be deducted from the cost of the land
Study illustration 9.2 on slide 21 on 3/27 PP (LN5) - CORRECT ANSWER -Emphasizes
these points:
- The cost of tearing down the barn will be added to the cost of the land
- The proceeds from the sale of the barn wood will be deducted from the cost of the land
Land ____ (is, is not) depreciated (LN6) - CORRECT ANSWER -is not
Land improvements (LN7) - CORRECT ANSWER -a land addition that has a limited life
longer than one year
(ex: driveways, parking lots, some types of landscaping, sidewalks)
True or False: Most land improvements are depreciated - CORRECT ANSWER -True;
most have limited lives
What is the adjusting journal entry to record depreciation on equipment? - CORRECT
ANSWER -Depreciation expense DR
Accumulated depreciation - equipment CR
What are the primary types of expenditures that would be included in the cost of buildings if the
building is purchased? (LN8) - CORRECT ANSWER -A. Purchasing Price
B. Closing costs - for example, attorney's fees and title insurance
UPDATED ACTUAL Exam Questions and
CORRECT Answers
PPE (also known as plant assets) should be recorded on a company's financial statements at
____. (LN1) - CORRECT ANSWER -Historical cost (LN1)
Write-down from historical cost if the asset's value is impaired
PPE ____ (may, may not) be increased to fair value after it is originally recorded on a company's
books. - CORRECT ANSWER -may not; do NOT increase the asset above historical cost
Capital Expenditure (LN2) - CORRECT ANSWER -Will increase a company's total
assets, but will not affect a company's net income
An asset account will be debited when recording a capital expenditure
(ex: truck, equipment, land, building)
Revenue Expenditure (LN2) - CORRECT ANSWER -Will increase a company's total
expenses. Therefore will decrease a company's net income
(ex: window washing, painting a room, lawn mowing, oil change of a truck)
To capitalize an expenditure means to record the expenditure as a/an _____ on a company's
books - CORRECT ANSWER -asset
What are the primary types of expenditures that would be included in the cost of land? -
CORRECT ANSWER -Purchase price
Closing costs -- for example, attorney's fees
Real estate commissions
Property taxes -- from previous years
, (current property taxes will be expensed)
Razed - CORRECT ANSWER -tore down
Slide 20 on 3/27 PP Example - CORRECT ANSWER -Review this slide
- The cost of tearing down the barn will be added to the cost of the land
- The proceeds from the sale of the barn wood will be deducted from the cost of the land
Study illustration 9.2 on slide 21 on 3/27 PP (LN5) - CORRECT ANSWER -Emphasizes
these points:
- The cost of tearing down the barn will be added to the cost of the land
- The proceeds from the sale of the barn wood will be deducted from the cost of the land
Land ____ (is, is not) depreciated (LN6) - CORRECT ANSWER -is not
Land improvements (LN7) - CORRECT ANSWER -a land addition that has a limited life
longer than one year
(ex: driveways, parking lots, some types of landscaping, sidewalks)
True or False: Most land improvements are depreciated - CORRECT ANSWER -True;
most have limited lives
What is the adjusting journal entry to record depreciation on equipment? - CORRECT
ANSWER -Depreciation expense DR
Accumulated depreciation - equipment CR
What are the primary types of expenditures that would be included in the cost of buildings if the
building is purchased? (LN8) - CORRECT ANSWER -A. Purchasing Price
B. Closing costs - for example, attorney's fees and title insurance
