MGMT 20000 Study Guide - Quiz Guide: Intangible Asset, Property Insurance, Current AssetExam
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Chapter 7 Practice problems
A company should classify a building and land held for a new plant facility as
• an investment.
• a current asset.
• an intangible asset.
• property, plant, and equipment.
Kensal Green, Inc. 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 new building. The costs incurred to tear
down the building should be
• expensed as incurred.
• added to the cost of the new building.
• added to the cost of the land.
• spread over the estimated time period between the tearing down of the building and the
completion of the plant
Driveways and parking lots are properly included in the Land Improvements account because
they are subject to depreciation.
Boiler Catering, Inc. purchased a commercial dishwasher by paying cash of $10,000. The
dishwasher's fair value on the date of the purchase was $12,000. The company incurred $500 in
transportation costs, $500 installation fees, and paid $250 for annual property insurance for the
equipment. What amount will the catering company record the dishwasher?
Hayne Company purchased land, building, and equipment for $500,000. The estimated fair
values of the land, building, and equipment are $100,000, $500,000, and $400,000, respectively.
At what amount would Hayne record the building?
• B. $ 500,000
• C. $ 250,000
• D. $ 100,000
Research and development costs should be:
• Expensed in the period they are determined to be unsuccessful
• Expensed in the period incurred
• Deferred pending determination of success
• Expensed if unsuccessful, capitalized if successful
Goodwill should be recorded in the accounting records only when
• it is purchased from another company.
• it can be established that a definite benefit or advantage has resulted to a firm from some
item such as a good name, capable staff, or reputation.
• it is acquired through the purchase of another business entity.
• a firm reports above normal earnings for five or more consecutive years.
Which of the following would be considered a capital expenditure?
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