1. A gain is recognized on the disposal of plant assets when:
A) The sales price is greater than the residual value but less than the book value.
C) The sales price is greater than the book value and greater than the residual value.
D) The sales price is greater than the book value and less than the residual value.
2. Silverado Company purchased equipment having an invoice price of $21,100. The terms of sale were 4/10, n/30, and Silverado paid within the discount period. In addition, Silverado paid a $155 delivery charge, $225 installation charge, and $947 sales tax. The amount recorded as the cost of this equipment is:
A) $21,583.
B) $20,636
D) $21,480
3. On March 2, 2009, Farlow Industries purchased a fleet of automobiles at a cost of $660,000. The cars are to be depreciated by the straight-line method over six years with no salvage value. Farlow uses the half-year convention to compute depreciation for fractional periods. The book value of the fleet of automobiles at December 31, 2010, will be:
A) $495,000.
B) $440,000.
D) $400,000
4. Which of the following would not be amortized?:
A) Oil well
B) Copyright
D) Patent
5. Del Rey Imports sold a depreciable plant asset for cash of $25,000. The accumulated depreciation amounted to $60,000, and a loss of $5,000 was recognized on the sale. Under these circumstances, the original cost of the asset must have been:
B) $65,000
C) $80,000
D) $90,000
6. Total stockholders' equity of Concord Company is $3,000,000. The fair market value of Concord's net identifiable assets (assets less liabilities) is $4,000,000. Wheeler Corporation makes an offer to purchase Concord's entire business for $4,800,000. In this situation:
A) Concord Company should report goodwill of $800,000 in its balance sheet.
B) Concord Company should report goodwill of $1,800,000 in its balance sheet.
D) Wheeler Corporation is willing to pay $800,000 for goodwill generated by Concord, and Wheeler will report this goodwill in its balance sheet if the purchase is finalized.
7. If an asset is determined to be impaired, it should be:
A. depreciated only using the straight-line method
C. reclassified as a liability
D. written down to its fair market value