1. At the time a company purchases an asset it must decide whether to follow revaluation procedures for the asset; once the election is made, it must be followed for the remainder of the asset's useful life.
- Assets that are experiencing rapid price changes must be revalued quarterly, other assets can be revalued on an annual basis.
- The journal entry to record a revaluation when the asset's price has increased includes a credit to the account revaluation surplus.
- All of the choices are correct regarding revaluation of plant assets.
2. An asset which costs $29,800 and has accumulated depreciation of $8,000 is sold for $21,600. What amount of gain of loss will be recognized when the asset is sold?
- A loss of $200.
- A loss of $8,200.
- A gain of $200.
- A gain of $8,200.
3. The book value of an asset is equal to the
- asset's fair value less its historical cost.
- asset's cost less accumulated depreciation.
- blue book value relied on by secondary markets.
- replacement cost of the asset.
4. Intangible assets are the rights and privileges that result from ownership of long-lived assets that
- do not have physical substance.
- are depletable natural resources.
- have been exchanged at a gain.
- must be generated internally.
5. A company purchases a remote site building for computer operations. The building will be suitable for operations after some expenditures. The wiring must be replaced to computer specifications. The roof is leaky and must be replaced. All rooms must be repainted and recarpeted and there will also be some plumbing work done. Which of the following statements is true?
- The cost of the building is the purchase price of the building, while the additional expenditures are all capitalized as Building Improvements.
- The cost of the building will not include the repainting and recarpeting costs.
- The wiring is part of the computer costs, not the building cost.
- The cost of the building will include the cost of replacing the roof.
6. Additions and improvements
- normally involve immaterial expenditures.
- typically only benefit the current accounting period.
- occur frequently during the ownership of a plant asset.
- increase the book value of plant assets when incurred.
7. Equipment with a cost of $240,000 has an estimated salvage value of $15,000 and an estimated life of 4 years or 15,000 hours. It is to be depreciated using the units-of-activity method. What is the amount of depreciation for the first full year, during which the equipment was used 3,300 hours?
- $49,500
- $67,800
- $60,000
- $56,250
8. The amount of sales tax collected by a retail store when making sales is
- a miscellaneous revenue for the store.
- not recorded because it is a tax paid by the customer.
- a current liability.
- recorded as an operating expense.
9. Admire County Bank agrees to lend Givens Brick Company $300,000 on January 1. Givens Brick Company signs a $300,000, 8%, 9-month note. What entry will Givens Brick Company make to pay off the note and interest at maturity assuming that interest has been accrued to September 30?
- Interest Payable 12,000 Notes Payable 300,000 Interest Expense 6,000 Cash 318,000
- Notes Payable 318,000 Cash 318,000
- Notes Payable 300,000 Interest Payable 18,000 Cash 318,000
- Interest Expense 18,000 Notes Payable 300,000 Cash 318,000
10. On January 1, 2013, Howard Company, a calendar-year company, issued $800,000 of notes payable, of which $200,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2013, is
- Current Liabilities, $200,000; Long-term Debt, $600,000.
- Current Liabilities, $800,000.
- Long-term Debt, $800,000.
- Current Liabilities, $400,000; Long-term Debt, $400,000.
11. The current carrying value of Kane's $900,000 face value bonds is $897,000. If the bonds are retired at 103, what would be the amount Kane would pay its bondholders?
- $927,000
- $906,000
- $897,000
- $900,000
12. A corporation recognizes a gain or loss
- only when bonds are converted into common stock.
- when bonds are redeemed at or before maturity.
- when bonds are converted into common stock and when they are redeemed before maturity.
- only when bonds are redeemed before maturity.
13. A bond with a face value of $200,000 and a quoted price of 102¼ has a selling price of
- $200,450.
- $204,050.
- $204,500.
- $240,450.
14. Each of the following may be shown on a supporting schedule instead of on the balance sheet except the
- interest rates.
- conversion privileges.
- current maturities of long-term debt.
- maturity dates.
15. The current portion of long-term debt should
- be reclassified as a current liability.
- be paid immediately.
- be classified as a long-term liability.
- not be separated from the long-term portion of debt.