Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

Plant Assets & Intangibles

Chapter 7

Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

1. Which of the following would be included

in the cost of land?
A. Brokers commissions
B. Back property taxes
C. Costs of clearing and removing unwanted
buildings
D. All of the above

Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

1. Which of the following would be included

in the cost of land?
A. Brokers commissions
B. Back property taxes
C. Costs of clearing and removing unwanted
buildings
D. All of the above

Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

2. Which of the following would NOT be

included in the cost of equipment?
A. Sales tax
B. Installation costs
C. Repairs after the equipment is placed in
service
D. Insurance while in transit

Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

2. Which of the following would NOT be

included in the cost of equipment?
A. Sales tax
B. Installation costs
C. Repairs after the equipment is
placed in service
D. Insurance while in transit

Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

3. Expenditures for parking lots, driveways,

and fences are debited to:
A. Land.
B. Land improvements.
C. Leasehold improvements.
D. Equipment.

Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

3. Expenditures for parking lots, driveways,

and fences are debited to:
A. Land.
B. Land improvements.
C. Leasehold improvements.
D. Equipment.

Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

4. Which of the following costs for a vehicle

is most likely to be recorded as a capital
expenditure?
A. Oil change
B. Engine overhaul
C. Replacement of a flat tire
D. Repainting

Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

4. Which of the following costs for a vehicle

is most likely to be recorded as a capital
expenditure?
A. Oil change
B. Engine overhaul
C. Replacement of a flat tire
D. Repainting

Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

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5. Depreciation:
A. is a process of valuation that records the
decline in market value of plant assets.
B. sets aside cash to replace plant assets as
they wear out.
C. is a process of allocating a plant assets
cost to expense over its life.
D. covers all of the above.

Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

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5. Depreciation:
A. is a process of valuation that records the
decline in market value of plant assets.
B. sets aside cash to replace plant assets as
they wear out.
C. is a process of allocating a plant
assets cost to expense over its life.
D. covers all of the above.

Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

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6. Which plant asset is NOT depreciated?

A. Land
B. Land improvements
C. Furniture and fixtures
D. All plant assets are depreciated

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6. Which plant asset is NOT depreciated?

A. Land
B. Land improvements
C. Furniture and fixtures
D. All plant assets are depreciated

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14

7. A company purchases a machine for

$50,000. It is assigned a $5,000 residual
value and a 10-year life. Compute annual
depreciation expense using the straightline method.
A. $5,500
B. $5,000
C. $4,500
D. $50,000
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7. A company purchases a machine for

$50,000. It is assigned a $5,000 residual
value and a 10-year life. Compute annual
depreciation expense using the straightline method.
A. $5,500
B. $5,000
C. $4,500
D. $50,000
Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

16

8. Which depreciation method would a

company most likely choose for tax
purposes?
A. Straight-line
B. Units-of-production
C. Double-declining-balance
D. Any of the above

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8. Which depreciation method would a

company most likely choose for tax
purposes?
A. Straight-line
B. Units-of-production
C. Double-declining-balance
D. Any of the above

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18

9. A company sells machinery for $25,000

cash. The machinery originally cost
$100,000 and its accumulated
depreciation balance is $80,000. The
entry to record the sale would include a:
A. loss of $75,000.
B. gain of $20,000.
C. gain of $5,000.
D. loss of $5,000.

Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

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9. A company sells machinery for $25,000

cash. The machinery originally cost
$100,000 and its accumulated
depreciation balance is $80,000. The
entry to record the sale would include a:
A. loss of $75,000.
B. gain of $20,000.
C. gain of $5,000.
D. loss of $5,000.

Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

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10. Allocating the cost of natural resources

that are used up during a period is called:

A. depreciation.
B. depletion.
C. amortization.
D. extraction.

Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

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10. Allocating the cost of natural resources

that are used up during a period is called:

A. depreciation.
B. depletion.
C. amortization.
D. extraction.

Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

22

11. If an intangible asset has an indefinite

life:
A. it is not amortized.
B. it is tested annually for decline in value.
C. a loss is recorded when its value
decreases.
D. all of the above are true.

Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

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11. If an intangible asset has an indefinite

life:
A. it is not amortized.
B. it is tested annually for decline in value.
C. a loss is recorded when its value
decreases.
D. all of the above are true.

Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

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12. The exclusive right to produce and sell an

invention is called a:
A. patent.
B. copyright.
C. trademark.
D. franchise.

Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

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12. The exclusive right to produce and sell an

invention is called a:
A. patent.
B. copyright.
C. trademark.
D. franchise.

Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

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13. Research & development costs are

recorded as an:
A. intangible asset.
B. expense.
C. intangible asset if the project is
successful; an expense if unsuccessful.
D. intangible asset or expense based upon
managements expectations.

Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

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13. Research & development costs are

recorded as an:
A. intangible asset.
B. expense.
C. intangible asset if the project is
successful; an expense if unsuccessful.
D. intangible asset or expense based upon
managements expectations.

Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

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Copyright 2012 Pearson Education Inc. Publishing as Prentice Hall.

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