14:14 03/04/2023 3.

Practice MCQs Chapter 10

3. Practice MCQs Chapter 10 Total points 15/15

When purchasing land, the costs for clearing, draining, filling, and grading 1/1
should be charged to a Land Improvements account.

True

False

Using the units-of-activity method of depreciating factory equipment will 1/1

generally result in more depreciation expense being recorded over the life
of the asset than if the straight-line method had been used.

True

False

Once an asset is fully depreciated, no additional depreciation can be taken 1/1

even though the asset is still being used by the business.

True

False

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14:14 03/04/2023 3. Practice MCQs Chapter 10

If an acquired franchise or license has an indefinite life, the cost of the 1/1
asset is not amortized.

True

False

If a plant asset is sold at a gain, the gain on disposal should reduce the 1/1
cost of goods sold section of the income statement.

True

False

A company purchased land for $90,000 cash. Real estate brokers' 1/1
commission was $5,000 and $7,000 was spent for demolishing an old
building on the land before construction of a new building could start.
Under the cost principle, the cost of land would be recorded at

$97,000.

$90,000.

$95,000.

$102,000.

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14:14 03/04/2023 3. Practice MCQs Chapter 10

Which one of the following items is not considered a part of the cost of a 1/1
truck purchased for business use?

Sales tax

Truck license

Freight charges

Cost of lettering on side of truck

Pine Company acquires land for $86,000 cash. Additional costs are as 1/1
follows:

Removal of shed $ 300

Filling and grading 1,500
Salvage value of lumber of shed 120
Broker commission 1,130
Paving of parking lot 10,000
Closing costs 560

Pine will record the acquisition cost of the land as

$86,000.

$87,690.

$89,610.

$89,370.

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14:14 03/04/2023 3. Practice MCQs Chapter 10

Shawnee Hospital installs a new parking lot. The paving cost $30,000 and 1/1
the lights to illuminate the new parking area cost $15,000. Which of the
following statements is true with respect to these additions?

$30,000 should be debited to the Land account.

$15,000 should be debited to Land Improvements.

$45,000 should be debited to the Land account.

$45,000 should be debited to Land Improvements.

Carley Company purchases a new delivery truck for $45,000. The sales 1/1
taxes are $3,000. The logo of the company is painted on the side of the
truck for $1,200. The truck license is $120. The truck undergoes safety
testing for $220. What does Carley record as the cost of the new truck?

$49,540

$49,420

$48,000

$47,420

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14:14 03/04/2023 3. Practice MCQs Chapter 10

Upton Company purchased equipment on January 1 at a list price of 1/1

$50,000, with credit terms 2/10, n/30. Payment was made within the
discount period and Upton was given a $1,000 cash discount. Upton paid
$2,500 sales tax on the equipment, and paid installation charges of $880.
Prior to installation, Upton paid $2,000 to pour a concrete slab on which to
place the equipment. What is the total cost of the new equipment?

$52,380

$54,380

$55,380

$50,500

Equipment was purchased for $75,000. Freight charges amounted to 1/1

$3,500 and there was a cost of $10,000 for building a foundation and
installing the equipment. It is estimated that the equipment will have a
$15,000 salvage value at the end of its 5-year useful life. Depreciation
expense each year using the straight-line method will be

$17,700.

$14,700.

$12,300.

$12,000.

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14:14 03/04/2023 3. Practice MCQs Chapter 10

A company purchased factory equipment on April 1, 2008 for $64,000. It is 1/1

estimated that the equipment will have an $8,000 salvage value at the end
of its 10-year useful life. Using the straight-line method of depreciation, the
amount to be recorded as depreciation expense at December 31, 2008 is

$6,400.

$5,600.

$4,200.

$4,800.

A company purchased factory equipment for $250,000. It is estimated that 1/1

the equipment will have a $25,000 salvage value at the end of its estimated
5-year useful life. If the company uses the double-declining-balance
method of depreciation, the amount of annual depreciation recorded for
the second year after purchase would be

$100,000.

$60,000.

$90,000.

$43,200.

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14:14 03/04/2023 3. Practice MCQs Chapter 10

A plant asset was purchased on January 1 for $40,000 with an estimated 1/1
salvage value of $8,000 at the end of its useful life. The current year's
Depreciation Expense is $4,000 calculated on the straight-line basis and
the balance of the Accumulated Depreciation account at the end of the
year is $20,000. The remaining useful life of the plant asset is

10 years.

8 years.

5 years.

3 years.

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