Question 1
Mountain Milk Co. acquired land, buildings, and equipment for a lump sum price of $210,000. At the time of acquisition, the land was appraised at $80,000, the buildings at $100,000, and the equipment at $60,000. The cost that should be assigned to the equipment is:
$52,500
$87,000
$60,000
$70,000
Question 2
In constructing a warehouse for its own use, Ridgeway Company incurred material costs of $25,000, direct labor costs of $60,000, and interest on funds borrowed for construction of $7,200. Ridgeway's fixed overheat rate is 40% of direct labor. Ridgeway was operating at full capacity during the construction. An outside contractor had bid $120,000 to build the warehouse. The capitalized cost of the warehouse should be:
$120,000
$116,200
$109,000
$92,200
Question 3
A company had the following information for the current year:
Beginning inventory: $50,000
Purchases: $45,000
Purchase returns: $3,000
Freight-in: $2,000
Freight-out: $1,000
Ending inventory: $37,000
The amount of cost of goods sold for the current year is:
$55,000
$56,000
$57,000
$58,000
Question 4
Which inventory cost flow method more closely matches the current cost of replacing inventory with the cost of goods sold when prices are changing?
LIFO
FIFO
Weighted-Average
Not enough information to determine
Question 5
In a periodic inventory system, to what account are purchases debited?
InventoryCost of Goods SoldPurchasesAccounts PayableTrue
False
Question 9
The LIFO perpetual and LIFO periodic methods usually resulting different ending inventory values if sales and purchases are made throughout the month.
True
False
Question 10
If a company acquires two assets in a lump sum purchase, it should capitalize each asset at its fair value.
True
False
Question 11
An asset acquired by a deferred payment plan may be recorded at the present value of the deferred payments, which is determined by discounting the payments at an appropriate rate of interest.
True
False
Question 12
If an exchange of nonmonetary assets lacks commercial substance, a company must recognize a loss in full on the exchange but gains only to the extent that cash is involved.
Question 13 TrueFalse A physical inventory count should be made at least once a year.The Merchandise Inventory account in the year-end trial balance represents ending inventory.The inventory account in the year-end trial balance represents beginning inventory.Material freight-in costs should be treated as an inventory cost.
Question 14
The Osage Company uses the sum-of-the-years' digits method of depreciation and computes depreciation to the nearest whole year. What amount should Osage record for second-year depreciation of a chain saw (purchased in April) costing $500, with an expected life of 5 years and an expected residual value of $50.
$120
$150
$100
$132
Question 15
Company A and Company B each purchased a $50,000 asset with an expected life of 10 years on January 1, 2011. Company A uses the straight-line method, and Company B uses the double-declining balance method. Each company has the same sales and expenses other than the depreciation on this asset in 2011. Which of the following statements is true?
Company A's method is appropriate for an asset whose benefits are expected to decline over the periods of use.
Company B's 2011 net income is lower than Company A's.
Company A and Company B has the same net income.
Company B uses an activity method of depreciation.
Question 16
The depreciable cost of an asset does not include:
Maintenance costs
Acquisition costs
Installation costs
Cost of preparation for use