Question

5.         A company purchases land and a building on the land. The land is appraised at $50,000, and the building at

$250,000. If the cost of the property is $264,000 in total, then the portion of the cost allocable to the land is:

a. $46,000         c. $44,000

            b. $52,000         d. $58,000

6.         J.R. Enterprises purchases an oil well for $300 million. It is estimated that 5 million barrels can be extracted from the well and that the estimated residual value of the well will be $0. Depletion expense for the first year if 150,000 barrels were extracted and sold, would be (use the production method):

a. $6,000,000     c. $9,000,000

            b. $10,000,000    d. $2,000,000

7.         The Land account would include all of the following costs except:

            a. the cost to clear trees on the land to build            

            b. the cost of building a parking lot on the land

            c. title fees paid at closing to acquire the land

            d. the cost of tearing down an old structure to clear the land to build

8.         Compton Contractors acquired a used storage building that was in poor physical condition due to inadequate maintenance and vandalism. Before placing the building in use, Compton spent several thousand dollars replacing broken windows, painting the building, and installing new support beams. These fix-up expenditures should be recorded by debiting which of the following accounts?

            a. Land Improvements                             c. Accumulated Depreciation, Building

            b. Building                                            d. Repair Expense

9.         B Company purchased a machine on January 1 for $4,000. The original estimated useful life was

five years, and the estimated residual value was $1,000. B Company uses straight-line depreciation. Two years after the purchase of the machine, B Company increases its estimated useful life by 3 years, but the residual value remains at $1,000. B Company should now record how much depreciation in year 3 (and beyond)?

a. $400             c. $300

            b. $360              d. $467

10.       The recording of an extraordinary repair will increase the carrying value of the asset repaired.

            a. True                                                  b. False

Answer 1