Ch 8.
48. Greer Company purchased land for $256,000. Additional costs include a $15,300 fee to a broker, a survey fee of $2,400, $1,750 to construct a fence and a legal fee of $8,500. What is the cost of the land?
| |
a. |
$256,000 |
| |
b. |
$282,200 |
| |
c. |
$284,600 |
| |
d. |
$281,000 |
| ANSWER: |
b |
| RATIONALE: |
All costs except the fence construction are included in the cost of the land. |
57. Cranberry Corp. constructed equipment to manufacture a new line of home products during 2016. The average balance of accumulated expenditures on the equipment during September through December 2016 was $500,000. Construction started on September 1, 2016 and was still in progress at the end of 2016. If Cranberry borrowed $500,000 for one year on September 1, 2016, to finance the construction, and the interest rate on the construction loan was 6%, how much interest can Cranberry capitalize as part of the equipment cost for 2016?
| |
a. |
$ -0- |
| |
b. |
$10,000 |
| |
c. |
$20,000 |
| |
d. |
$30,000 |
| ANSWER: |
b |
| RATIONALE: |
($500,000 × 6%) × 4/12 = $10,000 |
| Wexford Co.
Wexford Co. purchased a new delivery truck at the beginning of 2016. The truck has a cost of $37,000, an estimated life of 5 years, and an estimated residual value of $7,000. A full year’s depreciation expense is to be recorded in 2016. The truck was driven 20,000 miles during 2016 and 24,000 miles during 2017. The number of expected miles over five years is 100,000.
|
|
| 65. Refer to information for Wexford Co.
What is the amount by which double-declining-balance depreciation exceeds straight-line depreciation over the 5-year life of the truck?
| |
a. |
$ -0- |
| |
b. |
$ 7,000 |
| |
c. |
$37,000 |
| |
d. |
$ 6,000 |
| ANSWER: |
a |
| DIFFICULTY: |
Moderate |
|
121. Ramirez Stores purchased a trademark at the beginning of 2016 for $340,000. Economic benefits were expected for 10 years, but the trademark’s legal life was 20 years. Also, during 2016, Ramirez incurred research and development costs of $200,000. The book value of the trademarks at December 31, 2016, is
| |
a. |
$506,000 |
| |
b. |
$306,000 |
| |
c. |
$323,000 |
| |
d. |
$486,000 |
Ch 9.
51. If a company purchases $3,200 worth of inventory with terms of 3/10, n/30 on March 3 and pays March 12, then the amount paid to the seller would be
| |
a. |
$96 |
| |
b. |
$3,104 |
| |
c. |
$3,200 |
| |
d. |
None of these choices |
68. On November 1, 2016, Brownsville Co. borrowed $80,000 from State Bank and signed a 12%, six-month note payable, all due at maturity. The interest on this loan is stated separately. At December 31, 2016, the adjusting entry for this note includes a:
| |
a. |
Debit to Interest Expense for $3,200. |
| |
b. |
Credit to Notes Payable for $1,600. |
| |
c. |
Credit to Cash for $4,800. |
| |
d. |
Credit to Interest Payable for $1,600. |
89. Which of the following statements regarding contingencies is true?
| |
a. |
Contingencies that are probable and not estimable appear on the balance sheet. |
| |
b. |
Contingencies that are probable and not estimable are disclosed in the notes to the financial statements. |
| |
c. |
Contingencies that are remote but estimable are disclosed in the notes to the financial statements. |
| |
d. |
Contingent assets are recorded on the balance sheet, but not in the notes to the financial statements. |
111. Using the future value table, a student found that the future value amount of $1 for 5 years at an annual interest rate of 10% is 1.611. The student also observed that the future value of $1 for 5 years at 10% compounded semiannually is 1.629. This means that
| |
a. |
the more often the compounding, the higher the future value. |
| |
b. |
the student was looking in the wrong column; the second amount should be 1.611/2. |
| |
c. |
there was an error in the table. |
| |
d. |
when interest is compounded semiannually, more money must be deposited to have a desired ending balance. |
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