Multiple choice questions
1. Hickory Company made a lump- sum purchase of three pieces of machinery for $ 130,000 from an unaffiliated company. At the time of acquisition, Hickory paid $ 5,000 to determine the appraised value of the machinery. The appraisal disclosed the following values:
Machine A $ 70,000
Machine B $ 42,000
Machine C $ 28,000
What cost should be assigned to Machines A, B, and C, respectively?

2. A donated plant asset should be recorded at an amount equal to its:
a. Historical cost
b. Fair value
c. Book value on books of donor
d. Historical cost or fair value, whichever is more clearly determinable
3. Electro Corporation bought a new machine and agreed to pay for it in equal annual installments of $ 5,000 at the end of each of the next 5 years. Assume a prevailing interest rate of 15%. The present value of an ordinary annuity of $ 1 at 15% for 5 periods is 3.35. The future amount of an ordinary annuity of $ 1 at 15% for 5 periods is 6.74. The present value of $ 1 at 15% for 5 periods is 0.5. How much should Electro record as the cost of the machine?
a. $ 12,500
b. $ 16,750
c. $ 25,000
d. $ 33,700
4. When a company purchases land with a building on it and immediately tears down the building so that the land can be used for the construction of a plant, the costs incurred to tear down the building should be:
a. Expensed as incurred
b. Added to the cost of the plant
c. Added to the cost of the land
d. Amortized over the estimated time period between the tearing down of the building and the completion of the plant
5. Lyle Inc. purchased certain plant assets under a deferred payment contract. The agreement was to pay $ 20,000 at the time of purchase and $ 20,000 at the end of each of the next 5 years. The plant assets should be valued at:
a. present value of a $ 20,000 ordinary annuity for 5 years
b. $ 120,000
c. $ 120,000 minus imputed interest
d. $ 120,000 plus imputed interest
6. Ashton Company exchanged a nonmonetary asset with a cost of $ 30,000 and accumulated depreciation of $ 16,000 for another nonmonetary asset worth $ 12,000. Ashton also received $ 1,400 cash. In the entry to record this exchange, Ashton should record a:
a. $ 2,000 gain
b. $ 2,000 loss
c. $ 600 gain
d. $ 600 loss
7. Belardo Corporation constructed and manufac-tured certain assets and incurred the following avoidable interest costs in connection with those activities:

All of these assets required and extended period of time for completion. Assuming that the effect of capitalization is material, what is the total amount of interest cost to be capitalized?
a. $0
b. $20,000
c. $29,000
d. $36,000
8. The following expenditures were among those incurred by Jensen Corporation during the year ended December 31, 2016:
Replacement of files on portion of roof that had been leaking....... $4,000
Overhaul of machinery that is expected to extent its useful life for another 2 year..6,000
How much should be charged to repairs and maintenance in 2016?
a. $0
b. $4,000
c. $6,000
d. $10,000
9. When a company replaces an old asphalt roof on its plant with a new fiberglass insulated roof, which of the following types of expenditure occurs?
a. ordinary repair
b. addition
c. rearrangement
d. improvement
10. On January 2, 2016, Yuki yogurt Company decided to replace its obsolete refrigeration system with a more efficient one. The old system had a book value of $9,000 and fair value of $189,000 after permitting the contractor to keep the old refrigeration equipment. How much should Yuki capitalize as the cost of the new refrigeration system?
a. $189,000
b. $197,000
c. $190,000
d. $198,000

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a· $45,000 $45,000 $45,000 ь- $65,000 $39,000 $26,000 c. $67,500 $40,500 $27,000 d. $0,000 $42,000 $28,000 Avoidable Interest Costs Incurred Warehouse constructed for Belardo's own use $20,000 Specia-order machine for sale to unrelated customer, produced according to customer's specifications 9,000 Inventories routinely manufactured, produced on a repetitive basis 7,000