Multiple Choice Questions
1. Land improvements are:
A) Assets that increase the usefulness of land, and like land, are not depreciated.
B) Assets that increase the usefulness of land, but that have a limited useful life and are subject to depreciation.
C) Included in the cost of the land account.
D) Expensed in the period incurred.
E) Also called basket purchases.
2. Plant assets include:
A) Land.
B) Land improvements.
C) Buildings.
D) Machinery and equipment.
E) All of the above.
3. The cost of land can include:
A) Purchase price.
B) Assessments by local governments.
C) Costs of removing existing buildings.
D) Fees for insuring the title.
E) All of the above.
4. The total cost of an asset less its accumulated depreciation is called:
A) Historical cost.
B) Book value.
C) Present value.
D) Current (market) value.
E) Replacement cost.
5. A method that charges the same amount of expense over each period of the asset's useful life is called:
A) Accelerated depreciation.
B) Declining-balance depreciation.
C) Straight-line depreciation.
D) Units-of-production depreciation.
E) Modified accelerated cost recovery system (MACRS) depreciation.
6. A method that allocates an equal portion of the total depreciable cost for a plant asset to each unit produced is called:
A) Accelerated depreciation.
B) Declining-balance depreciation.
C) Straight-line depreciation.
D) Units-of-production depreciation.
E) Modified accelerated cost recovery system (MACRS) depreciation.
7. A depreciation method that produces larger depreciation expense during the early years of an asset's life and smaller expense in the later years is a (an):
A) Accelerated depreciation method.
B) Book value depreciation method.
C) Straight-line depreciation method.
D) Units-of-production depreciation method.
E) Unrealized depreciation method.
8. Revenue expenditures:
A) Are additional costs of plant assets that do not materially increase the asset's life or its productive capabilities.
B) Are known as balance sheet expenditures.
C) Extend the asset's useful life.
D) Substantially benefit future periods.
E) Are debited to asset accounts.
9. Ordinary repairs:
A) Are expenditures to keep an asset in normal operating condition.
B) Are necessary if an asset is to perform to expectations over its useful life.
C) Are treated as expenses.
D) Include cleaning, lubricating, and normal adjusting.
E) All of the above.
10. Betterments:
A) Are expenditures making a plant asset more efficient or productive.
B) Are also called improvements.
C) Do not always increase an asset's life.
D) Are capital expenditures, if material.
E) All of the above.