Questions -
1. Ryan Manufacturing, Inc. acquired a new machine with a purchase price of $94,000, with transportation costs of $8,000, installation costs of $6,000, and special acquisition fees of $2,000. What is the cost basis of the machine?
a. $ 96,000
b. $108,000
c. $102,000
d. $110,000
2. Alex, Inc. has a machine with a cost of $65,000, an estimated salvage value of $5,000 and an estimated life of 5 years or 15,000 hours. Alex plans to depreciate the machine using the units-of-production method. How much should Alex record for depreciation expense for the second full year, during which the machine was used 5,000 hours?
a. $8,000
b. $20,000
c. $12,000
d. $21,667
3. Richard's Widget Manufacturing, Inc. has a piece of equipment with a cost of $160,000, an estimated residual value of $10,000, an estimated life of 5 years and estimated life of 12,000 hours. The company will be using straight line method to calculate the equipment's depreciation. What is the amount of depreciation for the first full year?
a. $30,000
b. $32,500
c. $34,000
d. $40,000
4. A machine with a cost of $65,000 has an estimated residual value of $5,000 and an estimated life of 4 years or 18,000 hours. What is the amount of depreciation for the second full year, using the double declining-balance method?
a. $15,000
b. $30,000
c. $16,250
d. $32,500
5. Brando Print Shop sold an old copier for $3,500. The copier had a cost of $30,000 and accumulated depreciation of $27,500. What is the amount of the gain or loss on disposal of the fixed asset?
a. $2,500 loss
b. $1,000 loss
c. $2,500 gain
d. $1,000 gain
6. How are expenditures for research and development generally recorded?
a. current operating expenses
b. assets and amortized over their estimated useful life
c. assets and amortized over 40 years
d. current assets
7. What is the term used to refer to the amount of cost transferred to expense from a decline in the utility of intangible assets?
a. amortization
b. depletion
c. depreciation
d. allocation
8. On July 1, 2014, Wilson, Inc. purchased a mining site for $500,000. Wilson, Inc. estimates that it will be able to mine ore for the next 10 years. It expects to extract 100,000 tons from the mine and has estimated a residual value for the property of $80,000. During 2014 the company extracted 6,000 tons of ore. What amount should Wilson, Inc. record for depletion expense for 2014?
a. $12,600
b. $42,000
c. $25,200
d. $50,000
9. On December 31, Holly Bread Company discarded one of its baking ovens. The oven had an initial cost of $225,000 and an accumulated depreciation of $195,000. The Company had taken depreciation up to the end of the year. Which of the following will be included in the journal entry to record the disposal?
a. Accumulated Depreciation Dr. $225,000
b. Loss on Disposal of Asset $195,000
c. Equipment Cr. $225,000
d. Gain on Disposal of Asset $30,000
10 How are fixed assets normally presented in the balance sheet?
a. at current market values
b. at replacement costs
c. at cost less accumulated depreciation
d. in a separate section along with intangible assets
11. What does the par value per share of common stock represent?
a. the minimum selling price of the stock established by the articles of incorporation.
b. the minimum amount the stockholder will receive when the corporation is liquidated
c. an arbitrary amount established in the articles of incorporation
d. the amount of dividends per share to be received each year
12. Common stockholders of a corporation have all of the following rights except for
a. the right to vote in the election of the board of directors
b. the right to receive a minimum amount of dividends
c. the right to sell their stock to anyone they choose
d. the right to share in assets upon liquidation
13. Which of the following is true with regard to Stockholders' equity?
a. it is usually equal to cash on hand
b. it includes paid-in capital and liabilities
c. it includes retained earnings and paid-in capital
d. it is shown on the income statement
14. Tarleton Corporation issued 2,000 shares of common stock for $ 32,000. The stock has a par value of $10 per share. The journal entry to record the stock issuance would include a credit to Common Stock for
a. $20,000
b. $32,000
c. $12,000
d. $2,000
15. Mattie, Inc. acquired a building which was valued at $160,000 for property tax purposes in exchange
for 10,000 shares of its $5 par common stock. Mattie's stock is widely traded and the stock was selling for $15 per share at the time of this transaction. At what amount should Mattie, Inc. record the building?
a. $50,000
b. $150,000
c. $160,000
d. $200,000
16. Fox Corp. issues 1,000 shares of $10 par value common stock at $15 per share. The journal entry to record this stock issuance will include which of the following?
a. Credits to Common Stock $10,000 and to Paid-in Capital in Excess of Par Value $5,000.
b. Credits to Common Stock $10,000 and to Retained Earnings $5,000.
c. Credits to Common Stock $10,000 and to Paid-in Capital in Excess of Stated Value $5,000.
d. Credit to Common Stock $15,000.
17. What is the net effect on a company's balance sheet of the declaration and payment of a cash dividend?
a. decrease assets and decrease stockholders' equity
b. decrease liabilities and decrease stockholders' equity
c. increase stockholders' equity and decrease liabilities
d. increase assets and increase stockholders' equity
18. Assume Kim Photography, Inc. has 100,000 authorized shares of $4 par common stock, with 40,000 issued shares at $8. The company has declared a 2% stock dividend on a date when the market price was $11 a share. As a result of the stock dividend, what amount will be transferred from the retained earnings account to paid-in capital accounts?
a. $3,200
b. $6,400
c. $4,800
d. $8,800
19. How are companies required to report treasury stock on their balance sheets?
a. as an asset
b. as a decrease in stockholders' equity
c. as an increase in stockholders' equity
d. treasury stock is not shown on the balance sheet
20. Eric Pharmaceutical, Inc. purchased 10,000 shares of its own $10 par common stock for $25 per share, recording it at cost. What will be the effect on total stockholders' equity?
a. increase, $100,000
b. increase, $250,000
c. decrease, $100,000
d. decrease, $250,000