Problem 1: A company purchased land for $70,000 cash. Real estate brokers' 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:
a. $77,000.
b. $70,000.
c. $75,000.
d. $82,000.
Problem 2: A company purchased a delivery truck on January 1, 2005, for $18,000. It is estimated that the delivery truck will have a $4,000 salvage value at the end of its 5-year useful life. If the company recorded depreciation expense of $2,800 for the year 2006 on the delivery truck, the depreciation method used by the company is
a. not determinable.
b. the straight-line method.
c. the units-of-activity method.
d. the double-declining-balance method.
Problem 3: Anne Company has total cash register receipts of $6,825. This total includes a 5% sales tax. The entry to record the receipts will include a:
a. debit to Sales Tax Expense for $325.
b. credit to Sales for $6,000.
c. credit to Sales Taxes Payable for $825.
d. credit to Sales Taxes Payable for $325.
Problem 4: $200,000, 5%, 20-year bond was issued at 99. The proceeds received from the bond issuance are
a. $200,000.
b. $198,000.
c. $204,000.
d. $196,000.
Problem 5: A corporation issued $600,000 of 6%, 5-year bonds on January 1, at 102. Interest is paid semiannually on January 1 and July 1. If the corporation uses the straight-line method of amortization, the amount of bond interest expense to be recognized on July 1 is
a. $36,000.
b. $18,000.
c. $19,200.
d. $16,800.