Intermediate Accounting

Topics: Generally Accepted Accounting Principles, Depreciation, Costs Pages: 10 (2699 words) Published: April 24, 2014
MULTIPLE CHOICE—Conceptual

21.Plant assets may properly include
a.deposits on machinery not yet received.
b.idle equipment awaiting sale.
c.land held for possible use as a future plant site.
d.None of these answers are correct.

22.Which of the following is not a major characteristic of a plant asset? a.Possesses physical substance
b.Acquired for resale
c.Acquired for use
d.Yields services over a number of years

23.Which of these is not a major characteristic of a plant asset? a.Possesses physical substance
b.Acquired for use in operations
c.Yields services over a number of years
d.All of these are major characteristics of a plant asset.

24.Cotton Hotel Corporation recently purchased Emporia Hotel and the land on which it is located with the plan to tear down the Emporia Hotel and build a new luxury hotel on the site. The cost of the Emporia Hotel should be a.depreciated over the period from acquisition to the date the hotel is scheduled to be torn down. b.written off as an extraordinary loss in the year the hotel is torn down. c.capitalized as part of the cost of the land.

d.capitalized as part of the cost of the new hotel.

25.The cost of land does not include
a.costs of grading, filling, draining, and clearing.
b.costs of removing old buildings.
c.costs of improvements with limited lives.
d.special assessments.

26.The cost of land typically includes the purchase price and all of the following costs except a.grading, filling, draining, and clearing costs.
b.street lights, sewers, and drainage systems cost.
c.private driveways and parking lots.
d.assumption of any liens or mortgages on the property.

27.If a corporation purchases land and building and subsequently tears down the building and uses the property as a parking lot, the proper accounting treatment of the cost of the building would depend on a.the significance of the cost allocated to the building in relation to the combined cost of the land and building. b.the length of time for which the building was held prior to its demolition. c.the contemplated future use of the parking lot.

d.the intention of management for the property when the building was acquired.

28.The debit for a sales tax properly levied and paid on the purchase of machinery preferably would be a charge to a.the machinery account.
b.a separate deferred charge account.
c.miscellaneous tax expense (which includes all taxes other than those on income). d.accumulated depreciation--machinery.

29.Fences and parking lots are reported on the balance sheet as a.current assets.
b.land improvements.
c.land.
d.property and equipment.

S30.Historical cost is the basis advocated for recording the acquisition of property, plant, and equipment for all of the following reasons except a.at the date of acquisition, cost reflects fair value.

b.property, plant, and equipment items are always acquired at their original historical cost. c.historical cost involves actual trans¬actions and, as such, is the most reliable basis. d.gains and losses should not be anticipated but should be recognized when the asset is sold.

S31.To be consistent with the historical cost principle, overhead costs incurred by an enterprise constructing its own building should be a.allocated on the basis of lost production.
b.eliminated completely from the cost of the asset.
c.allocated on an opportunity cost basis.
d.allocated on a pro rata basis between the asset and normal operations.

32.Which of the following costs are capitalized for self-constructed assets? a.Materials and labor only
b.Labor and overhead only
c.Materials and overhead only
d.Materials, labor, and overhead

33.Which of the following assets do not qualify for capitalization of interest costs incurred during construction of the assets? a.Assets under construction for an enterprise's own use.
b.Assets intended for sale or lease that...
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