hhfa7ech07tif with Compch.docx

hhfa7ech07tif with Compch.docx

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hhfa7ech07tifwithCompch

FinancialAccounting,7e

Harrison/Horngren

TestItemFile

Chapter7:

PlantAssets&Intangibles

7.1-1Thecostofanyplantassetisthesumofallthecostsincurredtobringtheassettoitsintendeduse.

Answer:

TrueLO:

7-1Diff:

2EOC:

S7-2

7.1-2Thecostoflandmayincludethecosttoremoveanunwantedbuilding.

Answer:

TrueLO:

7-1Diff:

2EOC:

E7-15

7.1-3Oftheplantassets,buildingsaredepreciatedbecausethesearelong-termtangibleassets.

Answer:

TrueLO:

7-1Diff:

2EOC:

E7-15

7.1-4Landimprovementsarenotsubjecttodepreciation,astheseitemsaresubjecttodecay.

Answer:

FalseLO:

7-1Diff:

2EOC:

E7-15

7.1-5CostsoflandimprovementsareincludedintheLandaccount.

Answer:

FalseLO:

7-1Diff:

2EOC:

E7-17

7.1-6Anycosttogetmachineryupandrunningshouldbepartofthecostoftheassetanddepreciated.

Answer:

TrueLO:

7-1Diff:

2EOC:

E7-17

7.1-7Thecostofleaseholdimprovementsshouldbeexpensedimmediately,asthisisnotacapitalasset.

Answer:

FalseLO:

7-1Diff:

2EOC:

E7-17

7.1-8Thecostofassetspurchasedtogetherinalumpsumshouldbeallocatedusingthecostpaidforeachoftheassets.

Answer:

FalseLO:

7-1Diff:

2EOC:

S7-3

7.1-9Anexampleofalong-termassetwouldbe:

A.officesupplies.

B.furniture.

C.investmentinLQHcompany.

D.patents.

Answer:

BLO:

7-1Diff:

2EOC:

P7-49A

7.1-10Allamountspaidtoacquireaplantassetandtogetitreadyforitsintendedusearereferredtoas:

A.setupcosts.

B.capitalexpenditures.

C.maintenanceexpense.

D.thecostofanasset.

Answer:

DLO:

7-1Diff:

1EOC:

P7-48A

7.1-11Whichofthefollowingshouldbeincludedinthecostofland?

A.Constructioncostofaparkinglot

B.Landscaping

C.Realestatebrokeragecommission

D.Lighting

Answer:

CLO:

7-1Diff:

2EOC:

S7-2

7.1-12WhichofthefollowingisNOTanintangibleasset?

A.Copyright

B.Goodwill

C.Patent

D.Mineralrights

Answer:

DLO:

7-1Diff:

2EOC:

P7-48A

7.1-13Thecostofinstallingshrubberyshouldberecordedas:

A.land.

B.landimprovements.

C.landmaintenanceexpense.

D.landimprovementexpense.

Answer:

BLO:

7-1Diff:

2EOC:

P7-48A

7.1-14Thecostofassetsacquiredinalump-sumpurchasemustbeallocatedusingwhichmethod?

A.Book-valuemethod

BCostmethod

C.Percapitamethod

D.Relative-sales-value-method

Answer:

DLO:

7-1Diff:

2EOC:

S7-3

7.1-15Land,buildingsandequipmentareacquiredforalumpsumof$875,000.Themarketvaluesofthethreeassetsare,respectively,$200,000,$500,000and$300,000.Whatisthecostassignedtotheequipment?

A.$250,000

B.$262,500

C.$300,000

D.$342,857

Answer:

BLO:

7-1Diff:

2EOC:

S7-3

7.1-16Landispurchasedfor$62,500.Backtaxespaidbythepurchaserwere$7,500;totalcoststodemolishanexistingbuildingwere$11,000;fencingcostswere$12,500;andlightingcostswere$1,500.Whatisthecostoftheland?

A.$62,500

B.$81,000

C.$93,500

D.$95,000

Answer:

BLO:

7-1Diff:

2EOC:

E7-15

7.1-17WhichofthefollowingshouldbeincludedintheMachineryaccount?

A.Thecostoftransportingthemachinerytoitssetuplocation.

B.Thecostofamaintenanceinsuranceplanafterthemachineryisupandrunning.

C.Thecostofcalibratingthemachinerybeforeitisshipped.

D.Thecostofinsurancewhilethemachineryisbeingoverhauled.

Answer:

ALO:

7-1Diff:

2EOC:

E7-17

7.1-18MortonCorporationpurchasedequipmentfor$46,000.Mortonalsopaid$1,200forfreightandinsurancewhiletheequipmentwasintransit.Salestaxamountedto$850.Insurance,taxesandmaintenanceforthefirstyearofusewas$1,000.HowmuchshouldMortonCorporationcapitalizeasthecostoftheequipment?

A.$46,000

B.$46,850

C.$48,050

D.$49,050

Answer:

CLO:

7-1Diff:

2EOC:

E7-17

7.1-19Allexpenditurestorepairandrenovateanexistingbuildingforitsintendedusearechargedto:

A.land.

B.landimprovements.

C.landimprovementsexpense.

D.building.

Answer:

DLO:

7-1Diff:

2EOC:

P-48A

7.1-20MaxcoCompanyacquiredlandandbuildingsfor$1,000,000.Thelandisappraisedat$450,000andthebuildingsareappraisedat$800,000.ThedebitstotheLandandBuildingsaccountswillbe:

A.Land$360,000;Building$640,000.

B.Land$500,000;Building$500,000.

C.Land$450,000;Building$800,000.

D.Land$562,500;Building$437,500.

Answer:

ALO:

7-1Diff:

2EOC:

S7-3

7.1-21Inalump-sumpurchaseofassets,therelativesalesvalueisdefinedasthe:

A.totalpricepaidlessthevalueofthemostvaluableasset.

B.totalpricepaidcomparedtothetotalmarketvalue.

C.ratioofeachasset’smarketvaluetothetotalmarketvalue.

D.ratioofeachasset’smarketvaluetothetotalbookvalue.

Answer:

CLO:

7-1Diff:

2EOC:

S7-3

7.1-22BixbyCorporationpurchasedlandandabuildingfor$800,000.Anappraisalindicatesthattheland’svalueis$400,000andthebuilding’svalueis$500,000.WhenrecordingthistransactionGalaxyshoulddebit:

A.Landfor$800,000.

B.Buildingfor$355,555.

C.LandImprovement-Buildingfor$500,000.

D.Buildingfor$444,444.

Answer:

DLO:

7-1Diff:

2EOC:

S7-3

7.1-23TheAugustaHealthCompanypurchasedland,buildingsandequipmentfor$2,400,000.Thelandhasbeenappraisedat$915,000,thebuildingsat$1,125,000andtheequipmentat$510,000.Theequipmentaccountwillbedebitedfor:

A.$541,875.

B.$500,000.

C.$480,000.

D.$410,156.

Answer:

CLO:

7-1Diff:

2EOC:

S7-3

7.1-24Whichofthefollowingcostsassociatedwithadeliveryvanshouldbecapitalized?

I.Thevanisrepainted.

II.Thevan’stransmissioniscompletelyoverhauled.

III.Thevanismodifiedforaspecificuse.

A.IandII

B.IandIII

C.IIandIII

D.Alloftheseanswersarecorrect.

Answer:

CLO:

7-1Diff:

2EOC:

E7-17

7.1-25Thejournalentrytorecordamajorexpendituretoupgradeequipmentthatextendsitsusefullifebeyondtheoriginalestimatewouldincludea:

A.credittoDepreciationExpense.

B.debittoEquipment.

C.debittoDepreciationExpense.

D.debittoRepairExpense.

Answer:

BLO:

7-1Diff:

2EOC:

E7-17

7.1-26Pat’sPetsrecentlypaidtohavetheengineinitsdeliveryvanoverhauled.Theestimatedusefullifeofthevanwasoriginallyestimatedtobe7years.Theoverhaulisexpectedtoextendtheusefullifeofthevanto9years.Theoverhaulisregardedasa（n）:

A.revenueexpenditure.

B.capitalexpenditure.

C.equityexpenditure.

D.matchingexpenditure.

Answer:

BLO:

7-1Diff:

2EOC:

QC-8

7.1-27Capitalexpendituresarenotimmediatelyexpensedbecausetheseitems:

A.donotextendthelifeofanasset.

B.returnanassettoitspriorcondition.

C.increasetheasset’scapacity.

D.doalloftheabove.

Answer:

CLO:

7-1Diff:

2EOC:

S7-4

7.1-28Repairsmadetoequipmentaspartofayearlymaintenanceprojectwouldberecordedinthejournalbydebiting:

A.AccumulatedDepreciation.

B.DepreciationExpense.

C.Equipment.

D.RepairExpense.

Answer:

DLO:

7-1Diff:

2EOC:

S7-4

7.1-29Treatingacapitalexpenditureasanimmediateexpense:

A.overstatesassetsandoverstatesowners’equity.

B.overstatesexpensesandunderstatesnetincome.

C.understatesexpensesandoverstatesowners’equity.

D.understatesexpensesandunderstatesassets.

Answer:

BLO:

7-1Diff:

3EOC:

S7-4

7.2-1TheAccumulatedDepreciationaccountrepresentsaContra-Revenueaccount.

Answer:

FalseLO:

7-2Diff:

2EOC:

E7-18

7.2-2Obsolescencemaycauseanasset’susefullifetobelongerthantheasset’sphysicallife.

Answer:

FalseLO:

7-2Diff:

1EOC:

P7-49A

7.2-3Whenusingtheunits-of-productiondepreciationmethod,theasset’sactualcostisusedincomputingthefirstyearofdepreciation.

Answer:

TrueLO:

7-2Diff:

2EOC:

S7-5

7.2-4Iftheaccumulateddepreciationandresidualvalueofanassetarecorrectlycalculated,bookvaluewillequalthecostlessthetotalaccumulateddepreciation.

Answer:

TrueLO:

7-2Diff:

2EOC:

P7-52A

7.2-5Thestraight-linemethodisoneofthemostwidelyusedmethodsofcomputingdepreciationforfinancialstatementpurposes.

Answer:

TrueLO:

7-2Diff:

2EOC:

P7-52A

7.2-6Double-declining-balancedepreciationcomputestotaldepreciationbymultiplyingtheasset’sbookvaluebytwotimesthestraight-linerate.

Answer:

FalseLO:

7-3Diff:

3EOC:

S7-7

7.2-7Theprocessofallocatingaplantasset’scosttoexpenseovertheperiodinwhichtheassetisusediscalled:

A.amortization.

B.allocation.

C.depreciation.

D.depletion.

Answer:

CLO:

7-2Diff:

1EOC:

QC2

7.2-8Whichaccountingprincipledirectsthedepreciationprocess?

A.Fulldisclosure

B.Goingconcern

C.Historicalcost

D.Matching

Answer:

DLO:

7-2Diff:

1EOC:

QC2

7.2-9Thedepreciationprocessattemptstomatchthe:

A.salvagevalueoftheassetandthefuturemarketvalueoftheasset.

B.bookvalueandthecurrentmarketvalueoftheasset.

C.costoftheassetandthecashrequiredtoreplacetheasset.

D.revenuesearnedbytheassetandthecostoftheasset.

Answer:

DLO:

7-2Diff:

2EOC:

P7-51A

7.2-10Whichofthefollowingdepreciationmethodsbestfitsthoseassetsthattendtowearoutbeforetheybecomeobsolete?

A.Straight-linemethod

B.Depletionmethod

C.Double-declining-balancemethod

D.Units-of-productionmethod

Answer:

DLO:

7-2Diff:

2EOC:

E7-19

7.2-11Whichofthefollowingdepreciationmethodsbestappliestothoseassetsthatgenerategreaterrevenueearlierintheirusefullives?

A.Straight-linemethod

B.Depletionmethod

C.Double-declining-balancemethod

D.Units-of-productionmethod

Answer:

CLO:

7-2Diff:

2EOC:

E7-19

7.2-12Whichofthefoll