1. A long-term asset is recorded at the:
a. Cost of the asset.
b. Additional costs to get the asset ready for use.
c. Cost of the asset plus all costs necessary to the asset ready for use.
d. Cost of the asset less all costs necessary to the asset ready for use.
2. The Open Grill incurred the following costs in acquiring a new piece of land:
Cost of the land...........................................................$ 80,000
Commissions....................................................................4,800
Liability insurance for the first year.................................1,200
Cost of removing existing building...............................20,000
Sale of salvaged materials.............................................(4,000)
Total costs.................................................................$ 102,000
What is the total recorded cost of the land?
a. $102,000.
b. $100,800.
c. $106,000.
d. $80,000.
3. The Cheese Factory incurred the following costs related to acquiring a new piece of equipment:
Cost of the equipment.................................$50,000
Sales tax (8%).................................................4,000
Shipping..........................................................3,000
Installation......................................................2,000
Depreciation during the first month 1,000
Total costs...................................................$60,000
What is the total recorded cost of the equipment?
a. $60,000.
b. $50,000.
c. $57,000.
d. $59,000.
4. Which of the following is properly recorded as an intangible asset?
a. An internally developed trademark.
b. A piece of land.
c. A purchased patent.
d. An internally developed copyright.
5. Which of the following correctly describes the nature of depreciation?
a. Depreciation represents the valuation of property, plant, and equipment over its service life.
b. Depreciation represents the valuation of an intangible asset over its service life.
c. Depreciation represents the allocation of the cost of property, plant, and equipment over its service life.
d. Depreciation represents the allocation of the cost of an intangible asset over its service life.
6. Accumulated depreciation is
a. An expense account.
b. An asset.
c. A contra-asset.
d. A liability.
7. Depreciation in accounting is the:
a. Decrease in fair value of an asset.
b. Decrease in selling price of an asset.
c. Allocation of an asset's cost to an expense over time.
d. Change in fair value of an asset.