1. On February 12, Oceans Company purchased a tract of land as a factory site for 190,000. An existing building on the property was razed and construction was begun on a new factory building in March of the same year. Additional data are available as follows:
cost of razing old building - 55,000
title insurance and legal fees to purchase land - 7500
architect's fees - 52,500
new building construction cost - 975,000
the recorded cost of the completed factory building should be
a. 1,165,000
b 1,220,000
c. 1,027,500
d. 1,082,500
2. On October 1, Azuma Inc. exchanged 8,000 shares of its $25 par value common stock for a parcel of land to be held for future plant site. Azuma's common stock had a fair market value of $80 per share on the exchange date. Azuma received $36,000 from the sale of scrap when an existing building on the site was razed. The land should be carried at
a. 200,000
b. 236,000
c. 604,000
d. 640,000
3. The sume of the year's digits method of depreciation is being used for a machine with five-year estimated useful life. what would the fraction applied to the cost be depreciated in the fourth year?
a. 2/5
b. 4/5
c. 2/15
d. 4/15
4. Information needed to compute a depletion charged per unite includes the
a. estimated total amount of resources available
b. amount of resources removed during the period
c. cumulative amount of resources removed
d. amount of resources sold during the period
5. A method that ignores salvage value in the early years of the asset's life in caluculating periodic depreciation expense is the
a. productive output method
b. group compsite method
c. sum of the years digits method
d. double declining balance method
6. Which of the following depreciation methods most closely approximates the method used to deplete the cost of natural resources
a. straight line method
b. double declining balance method
c. sum of the years digits methods
d. units of production method
7. Which of the following depreciation methods applies a uniform depreciation rate each period to an asset's book value?
a. straight line
b. declining balance
c. units of production
d. sum of the years digits
8. which of the following reasons provides the best theoretical support for accelerated depreciation?
a. assets are more efficient in early years and initially generate more revenue
b expenses should be allocated in a manner that "smoothes" earnings
c. repairs and maintenance costs will probably increase in later periods, so depreciation should decline
d. accelerated depreciation provides easier replacement because of the time value of money
9. When the estimate of an asset's useful life is changed
a. depreciation expense for all past periods must be recalculated
b. there is no change in the amount of depreciation expense recorded for future years
c. only the depreciation expense in the remaining years is changed
d. none of these are true
10. the sale of a depreciable asset resulting in a loss indicates that the proceeds from the sale were
a. less than current market value
b. greater than cost
c. greater than book value
d. less than book value
11. Underwood COmpany purchased a machine on January 2, 2013, for $1,000,000. The machine has an estimated useful life of five years and a salvage value of $100,000. Depreciation was computed by the 150% declining-balance method. The accumulated depreciation balance at December 31, 2014, should be
a. 360,000
b. 459,000
c. 490,000
d. 510,000