1、Chapter 7Plant Assets Capitalized a cost that should have been expensed. This error understates expenses and overstates net income in the year of the error.EXERCISE-True/False The cost of a plant asset includes the purchase price, applicable taxes, purchase commissions, and all other normal amounts
2、paid to acquire the asset and get it ready for its intended use. (true) The cost of land may include the cost of paving to construct a parking lot. (false)EXERCISE-True/False Costs of land improvements are not included in the Land account. (true) Maintenance costs incurred after machinery is up and
3、running should be capitalized and depreciated separately from the equipment. (false)EXERCISE-True/False The cost of leasehold improvements should be amortized over the life of the underlying asset. (false) The cost of assets purchased together in a lump sum should be allocated using the relative sal
4、es value of each asset. (true)EXERCISE-True/False Of the plant assets, buildings are unique because they are not depreciated. (false) Because they are included in the cost of land, land improvements are not subject to depreciation. (false)EXERCISE-Choice Which of the following is NOT a plant asset?
5、a. supplies b. furniture c. buildings d. land (a)EXERCISE-Choice All amounts paid to acquire a plant asset and to get it ready for its intended use are referred to as: a. immediate expenses b. capital expenditures c. salvage value d. the cost of an asset (d)EXERCISE-Choice Which of the following sho
6、uld NOT be included in the cost of land? a. purchase price b. back property taxes c. real estate brokerage commission d. lighting (d)EXERCISE-Choice Which of the following is NOT an intangible asset? a. mineral rights b. patent c. copyright d. goodwill (a)EXERCISE-Choice The cost of installing an in
7、-ground sprinkler system for watering a lawn should be recorded as: a. land b. land improvements c. land maintenance expense d. land improvement expense (b)EXERCISE-Choice The cost of assets acquired in a lump-sum purchase must be allocated using which method? a. cost method b. per capita method c.
8、relative sales value method d. book-value method (c)EXERCISE-Choice Land, buildings, and equipment are acquired for a lump sum of $950,000. 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. $250,000 b.$285,000 c.
9、 $300,000 d.$316,667 (b)EXERCISE-Choice Land is purchased for $60,000. Back taxes paid by the purchaser were $3,000, total cost to demolish an existing building was $2,400, fencing costs were $2,500, and lighting costs were $500. What is the cost of the land? a. $60,000 b. $65,400 c. $66,700 d. $67,
10、200 (b)EXERCISE-Choice Which of the following would NOT be included in the Machinery account? a. cost of transporting the machinery to its setup location b. cost of a maintenance insurance plan after the machinery is up and running c. cost of installing the machinery d. cost of insurance while the m
11、achinery is in transit (b)EXERCISE-Choice Stockton Corporation purchased equipment for $32,000. Stockton also paid $400 for freight and insurance while the equipment was in transit. Sales tax amounted to $240. Insurance, taxes, and maintenance the first year of use cost $1,000. How much should Stock
12、ton Corporation capitalize as the cost of the equipment? a. $30,000 b. $30,400 c. $32,640 d. $31,640 (c)EXERCISE-Choice The cost of removing an old building to make land suitable for its intended use is charged to: a. land b. land improvements c. land improvements expense d. building expense (a)EXER
13、CISE-Choice Which of the following costs associated with a delivery van should be capitalized? I. The van is modified for a specific use. II. The vans transmission is completely overhauled. III. The van is repainted. a. I and II b. I and III c. II and III d. All of these answers are correct. (a)EXER
14、CISE-Choice A major expenditure made to upgrade equipment that extends its useful life beyond the original estimate is journalized by: a. crediting Depreciation Expense b. debiting Equipment c. debiting Depreciation Expense d. debiting Repair Expense (modb)EXERCISE-Choice Capital expenditures: a. in
15、crease the efficiency of an asset b. extend the useful life of an asset c. increase the sales value of an asset d. All of these answers are correct. (d)EXERCISE-Choice Repairs made to equipment as part of a yearly maintenance project would be recorded in the journal by: a. debiting Equipment b. debiting Repair Expense c. debiting Depreciation Expense d. debiting Accumulated Depreciation (b)
