PRETEST – INTACC P.

1
1. Radner Shipping purchased a truck and a trailer for $54,000. An appraisal has set the fair
market value of the truck and the trailer at $19,000 and $38,000, respectively. At what amount
should Radner record the truck?
a. $19,000
b. $36,000
c. $18,000
d. $38,000
2. The caption “property, plant, and equipment” generally includes
a. assets purchased for sale
b. current assets
c. depreciable assets
d. assets that have no future service potential
3. The carrying amount of an asset is the
a. market value of the asset
b. original cost of the asset
c. acquisition cost of the asset less any accumulated depreciation on the asset
d. total of all expenses associated with the asset
4. Which of the following is NOT a current asset?
a. Accounts Receivable
b. Market Securities
c. Property, Plant, and Equipment
d. Cash
5. Tainan company decides to exchange its old machine and $2,600,000 cash for a new
machine. The old machine has a book value of $1,400,000 and a fair value of $2,400,000 on the
date of the exchange. If this transaction has commercial substance, the cost of the new
machine would be recorded at
a. $4,000,000
b. $2,600,000
c. $5,000,000
d. cannot be determined
6. Henner Corporation made a basket purchase of three pieces of machinery for $72,000. The
fair market value of the machinery were determined to be as follows:
Machine A $13,500
Machine B 27,000
Machine C 40,500
What cost should Henner record for Machine C?
a. $40,500
b. $27,000
c. $36,000
d. $31,500
7. On January 1, 2017, Alberta Company purchased land and a building for $1,120,000. At the
time of the purchase, it was estimated that the building had a market value of $700,000. On
January 5, Alberta installed a fence around the property at a cost of $7,000. Given this
information, the journal entry to record the purchase of the land and building would include a
a. debit to land for $700,000
b. debit to land for $413,000
c. debit to land for $420,000
d. debit to land for $427,000
8. During 2017, Bernard Inc. constructed a new factory. Bernard used its current employees to
build the factory. Building material costs for the new factory were $2,700,000; total labor costs
were $1,400,000; total company overhead was $7,500,000 (20% of which could be assigned to
the new project); and interest paid on a new construction loan for the project was $750,000.
What was the total cost of the self-constructed factory?
a. $5,600,000
b. $4,850,000
c. $6,350,000
d. $12,350,000
9. The cost assigned to the individual assets acquired in a basket purchase is based on their
relative
a. fair market values
b. depreciable costs
c. carrying amounts
d. historical costs
10. Koahsiung company exchanges its old office equipment and $85,000 for new office
equipment. The old office equipment has a book value of $36,000 and a fair value of $20,000
on the date of exchange. If this transaction has commercial substance, the cost of the new
office equipment would be recorded at
a. $85,000
b. $121,000
c. $105,000
d. cannot be determined
11. Which of the following is NOT a capitalizable cost on a self-constructed asset?
a. Total labor costs incurred
b. Total company overhead
c. Total materials used
d. Interest associated with money borrowed to finance the construction project
12. Belpre Inc. constructed a new office building. Building material costs for the new building
were $3,000,000; total labor costs were $2,500,000; total company overhead was $9,000,000
(25% of which could be assigned to the new project); and interest paid on a new construction
loan for the project was $1,250,000
$9,000,000
13. The accumulated depreciation account is credited when
a. an asset is traded for a similar asset
b. the depreciation expense for the year is recorded
c. an asset is traded for a dissimilar asset
d. a new asset is purchased
14. Another name for residual value is
a. salvage value
b. carrying value
c. carrying amount
d. current value
15. A company’s old machine that cost $60,000 and had accumulated depreciation of $24,000
was traded in on a new machine having an estimated 20-year life with a fair value of $70,000.
The company also paid $50,000 each, along with its old machine to acquire the new machine. If
this transaction has commercial substance, the new machine should be recorded at
a. $47,000
b. $70,000
c. $120,000
d. $186,000
16. The undepreciated cost of an asset is referred to as
a. sales value
b. carrying amount
c. salvage value
d. market value
17. Furniture with a list of $6,000 is purchased on account for $5,000. Which of the following
entries properly records this transaction?
a. Furniture 6,000
Cash 6,000
b. Furniture 6,000
Accounts Payable 6,000
c. Furniture 5,000
Accounts Payable 5,000
d. Furniture 5,000
Cash 5,000
18. A depreciable asset’s carrying amount can never be less than its
a. salvage value
b. capitalized cost
c. historical cost
d. fair market value
19. On January 1, 2017, Salina Company purchased a land and a building for $2,400,000. At the
time of the purchase, it was estimated that the building had a market value of $1,400,000. On
January 5, Salina installed a fence around the property at a cost of $14,000. Given this
information, the entry to record the cost of the fence would include a
a. Debit to Land Improvements for $14,000
b. Debit to Fence Expense for $14,000
c. Debit to Land for $14,000
d. Credit to Land for $14,000
20. Atchison Corporation purchased equipment, a building, and land for $1,000,000 ($200,000
in cash and $800,000 in notes). After the purchase the property was appraised. Fair market
values were determined to be $240,000 for the equipment; $540,000 for the building, and
$420,000 for the land.
Prepare the entry to record the purchase of this property by Atchison Corporation. If an
amount box does not require an entry, leave it blank.
Equipment 200,000
Building 450,000
Land 350,000
Cash 200,000
Notes Payable 800,000
21. Depreciation can best be described as a method of
a. allocating the costs of assets over their useful lives
b. accumulating funds for the replacement of an assets
c. reducing the carrying cost of assets to current market values
d. deriving tax benefits
22. When the depreciable cost of equipment is divided by its estimated useful life, the result is
referred to as
a. depreciation expense
b. carrying value
c. accumulated depreciation
d. carrying amount
23. Freight costs incurred when an operating asset is purchased should generally be
a. deducted from the accumulated depreciation account
b. expensed in the period incurred
c. added to the cost of the new asset
d. not recorded in the accounts
24. Boone Company purchased a piece of machinery by paying $5,000 cash. In addition to the
purchase price, the company incurred $100 freight charges. The machine has an estimated
useful life of 5 years and will require $125 for insurance over that period. Boone Company
would record the cost of the machine at
a. $5,225
b. $5,000
c. $5,125
d. $5,100
25. In order to calculate periodic depreciation expenses, which of the following need NOT be
known about an asset?
a. its estimated useful life
b. its estimated salvage value
c. its acquisition cost
d. the amount of the cash down payment
26. How is accumulated depreciation classified
a. Contra-asset
b. Liability
c. Expense
d. Equity