Q: A company purchases land and a building together for $$2,800,000. The appraised values are 300$$,000 for the land and $2,700,000 for the building. What is the amount allocated to the land using the relative-sales-value method?

$$280,000 \text{ (rounded to nearest thousand) }$$

Q: Which of the following is the correct formula for calculating annual depreciation expense using the straight-line method?

$$\text{Annual Depreciation} = \frac{\text{Cost} - \text{Residual Value}}{\text{Useful Life}}$$

Question 1

Which of the following costs should NOT be included in the cost of land when acquired for use in operations?

Accepted Answer

Cost of paving the parking lot

Question 2

A company purchases land and a building together for $$2,800,000. The appraised values are 300$$,000 for the land and $2,700,000 for the building. What is the amount allocated to the land using the relative-sales-value method?

Accepted Answer

$$280,000 	ext{ (rounded to nearest thousand) }$$

Question 3

Which of the following is a capital expenditure?

Accepted Answer

Adding a new wing to a building

Question 4

Which depreciation method results in the highest depreciation expense in the first year?

Accepted Answer

Double-declining-balance method

Question 5

A machine was purchased for $$50,000 with an estimated residual value of 5$$,000 and a useful life of 5 years. Using the straight-line method, what is the annual depreciation expense?

Accepted Answer

$9,000

Question 6

Which of the following statements about depreciation is TRUE?

Accepted Answer

Depreciation allocates the cost of an asset over its useful life

Question 7

FedEx sells equipment on September 30, 2021, for $$7,300 cash. The equipment cost 10$$,000, had no residual value, and was depreciated straight-line over 10 years. What is the book value at the date of sale if the equipment was purchased on January 1, 2018?

Accepted Answer

$6,750

Question 8

Which of the following is NOT an intangible asset?

Accepted Answer

Oil reserve

Question 9

A company extracts 3,000,000 barrels of oil from a reserve that cost $100,000,000 and contains an estimated 10,000,000 barrels. What is the depletion expense for the year?

Accepted Answer

$30,000,000

Question 10

Which of the following best describes the accounting treatment for research and development (R&D) costs under U.S. GAAP?

Accepted Answer

R&D costs are expensed as incurred

Question 11

Which of the following is the correct formula for calculating annual depreciation expense using the straight-line method?

Accepted Answer

$$	ext{Annual Depreciation} = \frac{	ext{Cost} - 	ext{Residual Value}}{	ext{Useful Life}}$$

Question 12

Which of the following transactions would be classified as an investing activity on the statement of cash flows?

Accepted Answer

Purchase of equipment

Question 13

Which of the following statements about asset impairment is correct?

Accepted Answer

Impairment occurs when the asset's net book value exceeds its estimated future cash flows

Question 14

A company purchases equipment for $$41,000 with a useful life of 5 years and a residual value of 1$$,000. Using the double-declining-balance method, what is the depreciation expense for the first year?

Accepted Answer

$16,400

Question 15

Which of the following is NOT a reason for classifying plant assets into categories such as land, building, and equipment?

Accepted Answer

To ensure all assets are depreciated equally

Question 16

Which of the following is true regarding the treatment of leasehold improvements?

Accepted Answer

They are depreciated or amortized over the lease term

Question 17

A company changes the estimated useful life of an asset due to new information. How is this change accounted for?

Accepted Answer

Account for the change prospectively in the period of change and future periods

Question 18

Which of the following best describes the cash flow impact of depreciation expense?

Accepted Answer

It is a non-cash expense added back to net income in operating activities

Question 19

Which of the following is true about goodwill?

Accepted Answer

It is only recorded when purchased

Question 20

Which Excel function would you use to calculate straight-line depreciation for an asset?

Accepted Answer

SLN

Plant Assets, Natural Resources, and Intangibles: Financial Accounting Study Notes

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