hhfa7ech07tif with Compch.docx

1、hhfa7ech07tif with CompchFinancial Accounting, 7eHarrison/HorngrenTest Item FileChapter 7: Plant Assets & Intangibles7.1-1 The cost of any plant asset is the sum of all the costs incurred to bring the asset to its intended use. Answer: True LO: 7-1 Diff: 2 EOC: S7-27.1-2 The cost of land may include

2、 the cost to remove an unwanted building. Answer: True LO: 7-1 Diff: 2 EOC:E7-157.1-3 Of the plant assets, buildings are depreciated because these are long-term tangible assets. Answer: True LO: 7-1 Diff: 2 EOC: E7-157.1-4 Land improvements are not subject to depreciation, as these items are subject

3、 to decay. Answer: False LO: 7-1 Diff: 2 EOC: E7-157.1-5 Costs of land improvements are included in the Land account. Answer: False LO: 7-1 Diff: 2 EOC: E7-177.1-6 Any cost to get machinery up and running should be part of the cost of the asset and depreciated. Answer: True LO: 7-1 Diff: 2 EOC: E7-1

4、77.1-7 The cost of leasehold improvements should be expensed immediately, as this is not a capital asset. Answer: False LO: 7-1 Diff: 2 EOC: E7-177.1-8 The cost of assets purchased together in a lump sum should be allocated using the cost paid for each of the assets. Answer: False LO: 7-1 Diff: 2 EO

5、C: S7-37.1-9 An example of a long-term asset would be: A. office supplies.B. furniture.C. investment in LQH company.D. patents. Answer: B LO: 7-1 Diff: 2 EOC: P7-49A7.1-10 All amounts paid to acquire a plant asset and to get it ready for its intended use are referred to as:A.set up costs.B.capital e

6、xpenditures .C. maintenance expense.D. the cost of an asset. Answer: D LO: 7-1 Diff: 1 EOC: P7-48A7.1-11 Which of the following should be included in the cost of land?A. Construction cost of a parking lotB. LandscapingC. Real estate brokerage commissionD. Lighting Answer: C LO: 7-1 Diff: 2 EOC: S7-2

7、7.1-12 Which of the following is NOT an intangible asset?A. CopyrightB.GoodwillC. Patent D. Mineral rights Answer: D LO: 7-1 Diff: 2 EOC: P7-48A7.1-13 The cost of installing shrubbery should be recorded as:A. land.B. land improvements.C. land maintenance expense.D. land improvement expense. Answer:

8、B LO: 7-1 Diff: 2 EOC: P7-48A7.1-14 The cost of assets acquired in a lump-sum purchase must be allocated using which method?A. Book-value methodB Cost methodC.Per capita methodD.Relative-sales-value-method Answer: D LO: 7-1 Diff: 2 EOC: S7-37.1-15 Land, buildings and equipment are acquired for a lum

9、p sum of $875,000. The market values of the three assets are, respectively, $200,000, $500,000 and $300,000. What is the cost assigned to the equipment?A. $250,000B. $262,500C. $300,000D. $342,857 Answer: B LO: 7-1 Diff: 2 EOC: S7-37.1-16 Land is purchased for $62,500. Back taxes paid by the purchas

10、er were $7,500; total costs to demolish an existing building were $11,000; fencing costs were $12,500; and lighting costs were $1,500. What is the cost of the land?A. $62,500B. $81,000C. $93,500D. $95,000 Answer: B LO: 7-1 Diff: 2 EOC: E7-157.1-17 Which of the following should be included in the Mac

11、hinery account? A. The cost of transporting the machinery to its setup location.B. The cost of a maintenance insurance plan after the machinery is up and running.C. The cost of calibrating the machinery before it is shipped.D. The cost of insurance while the machinery is being overhauled. Answer: A

12、LO: 7-1 Diff: 2 EOC: E7-177.1-18 Morton Corporation purchased equipment for $46,000. Morton also paid $1,200 for freight and insurance while the equipment was in transit. Sales tax amounted to $850. Insurance, taxes and maintenance for the first year of use was $1,000. How much should Morton Corpora

13、tion capitalize as the cost of the equipment?A. $46,000B. $46,850C. $48,050D. $49,050 Answer: C LO: 7-1 Diff: 2 EOC: E7-177.1-19 All expenditures to repair and renovate an existing building for its intended use are charged to:A. land.B. land improvements.C. land improvements expense.D. building. Ans

14、wer: D LO: 7-1 Diff: 2 EOC: P-48A7.1-20 Maxco Company acquired land and buildings for $1,000,000. The land is appraised at $450,000 and the buildings are appraised at $800,000. The debits to the Land and Buildings accounts will be:A. Land $360,000; Building $640,000.B. Land $500,000; Building $500,0

15、00.C. Land $450,000; Building $800,000.D. Land $562,500; Building $437,500. Answer: A LO: 7-1 Diff: 2 EOC: S7-37.1-21 In a lump-sum purchase of assets, the relative sales value is defined as the: A. total price paid less the value of the most valuable asset.B. total price paid compared to the total

16、market value.C. ratio of each assets market value to the total market value.D. ratio of each assets market value to the total book value. Answer: C LO: 7-1 Diff: 2 EOC: S7-37.1-22 Bixby Corporation purchased land and a building for $800,000. An appraisal indicates that the lands value is $400,000 an

17、d the buildings value is $500,000. When recording this transaction Galaxy should debit:A. Land for $800,000.B. Building for $355,555.C. Land Improvement-Building for $500,000.D. Building for $444,444. Answer: D LO: 7-1 Diff: 2 EOC: S7-37.1-23 The Augusta Health Company purchased land, buildings and

18、equipment for $2,400,000. The land has been appraised at $915,000, the buildings at $1,125,000 and the equipment at $510,000. The equipment account will be debited for:A. $541,875.B. $500,000.C. $480,000.D. $410,156. Answer: C LO: 7-1 Diff: 2 EOC: S7-37.1-24 Which of the following costs associated w

19、ith a delivery van should be capitalized? I. The van is repainted. II. The vans transmission is completely overhauled.III. The van is modified for a specific use.A. I and II B. I and IIIC. II and IIID. All of these answers are correct. Answer: C LO: 7-1 Diff: 2 EOC: E7-177.1-25 The journal entry to

20、record a major expenditure to upgrade equipment that extends its useful life beyond the original estimate would include a:A. credit to Depreciation Expense.B. debit to Equipment.C. debit to Depreciation Expense.D. debit to Repair Expense. Answer: B LO: 7-1 Diff: 2 EOC: E7-177.1-26 Pats Pets recently

21、 paid to have the engine in its delivery van overhauled. The estimated useful life of the van was originally estimated to be 7 years. The overhaul is expected to extend the useful life of the van to 9 years. The overhaul is regarded as a(n):A. revenue expenditure.B. capital expenditure.C. equity exp

22、enditure.D. matching expenditure. Answer: B LO: 7-1 Diff: 2 EOC:QC-87.1-27 Capital expenditures are not immediately expensed because these items:A. do not extend the life of an asset.B. return an asset to its prior condition.C. increase the assets capacity.D. do all of the above. Answer: C LO: 7-1 D

23、iff: 2 EOC: S7-47.1-28 Repairs made to equipment as part of a yearly maintenance project would be recorded in the journal by debiting:A. Accumulated Depreciation.B. Depreciation Expense.C. Equipment.D. Repair Expense. Answer: D LO: 7-1 Diff: 2 EOC:S7-47.1-29 Treating a capital expenditure as an imme

24、diate expense:A. overstates assets and overstates owners equity.B. overstates expenses and understates net income.C. understates expenses and overstates owners equity.D. understates expenses and understates assets. Answer: B LO: 7-1 Diff: 3 EOC:S7-47.2-1 The Accumulated Depreciation account represen

25、ts a Contra-Revenue account. Answer: False LO: 7-2 Diff: 2 EOC: E7-187.2-2 Obsolescence may cause an assets useful life to be longer than the assets physical life. Answer: False LO: 7-2 Diff: 1 EOC: P7-49A7.2-3 When using the units-of-production depreciation method, the assets actual cost is used in

26、 computing the first year of depreciation. Answer: True LO: 7-2 Diff: 2 EOC: S7-57.2-4 If the accumulated depreciation and residual value of an asset are correctly calculated, book value will equal the cost less the total accumulated depreciation. Answer: True LO: 7-2 Diff: 2 EOC: P7-52A7.2-5 The st

27、raight-line method is one of the most widely used methods of computing depreciation for financial statement purposes. Answer: True LO: 7-2 Diff: 2 EOC: P7-52A7.2-6 Double-declining-balance depreciation computes total depreciation by multiplying the assets book value by two times the straight-line ra

28、te. Answer: False LO: 7-3 Diff: 3 EOC: S7-77.2-7 The process of allocating a plant assets cost to expense over the period in which the asset is used is called:A. amortization.B. allocation.C. depreciation.D. depletion. Answer: C LO: 7-2 Diff: 1 EOC:QC 27.2-8 Which accounting principle directs the de

29、preciation process?A. Full disclosureB. Going concernC. Historical costD. Matching Answer: D LO: 7-2 Diff: 1 EOC:QC 27.2-9 The depreciation process attempts to match the:A.salvage value of the asset and the future market value of the asset.B.book value and the current market value of the asset.C.cos

30、t of the asset and the cash required to replace the asset.D.revenues earned by the asset and the cost of the asset. Answer: D LO: 7-2 Diff: 2 EOC:P7-51A7.2-10 Which of the following depreciation methods best fits those assets that tend to wear out before they become obsolete?A. Straight-line methodB

31、. Depletion methodC. Double-declining-balance methodD. Units-of-production method Answer: D LO: 7-2 Diff: 2 EOC: E7-197.2-11 Which of the following depreciation methods best applies to those assets that generate greater revenue earlier in their useful lives?A. Straight-line methodB. Depletion methodC. Double-declining-balance methodD. Units-of-production method Answer: C LO: 7-2 Diff: 2 EOC: E7-197.2-12 Which of the foll