Accouting

Chapter 7

The Cheese Factory purchased a new machine and incurred the following costs:

What is the total recorded cost of the new machine?

A) $60,000.

B) $59,000.

C) $57,000.

D) $50,000.

2 CORRECT

(LO7-1) Which of the following expenditures should be recorded as an asset?

A) Interest costs during the construction period of a new building.

B) Repair of a machine.

C) Property taxes incurred on an existing building.

D) Depreciation during the first year of an existing building.

3 CORRECT

(LO7-2) Which of the following is properly recorded as an intangible asset?

A) An internally developed trademark.

B) A piece of land.

C) A purchased patent.

D) An internally developed copyright.

4 CORRECT

(LO7-4) Which of the following depreciation methods typically results in the highest depreciation expense during the first year of an asset's life?

A) Straight-line method.

B) Activity-based method.

C) Double declining balance method.

D) Each method will result in the same depreciation during the first year.

5 CORRECT

(LO7-4) Which of the following correctly describes the nature of depreciation?

A) Depreciation represents the valuation of property, plant, and equipment over its service life.

B) Depreciation represents the valuation of an intangible asset over its service life.

C) Depreciation represents the allocation of the cost of property, plant, and equipment over its service life.

D) Depreciation represents the allocation of the cost of an intangible asset over its service life.

6 CORRECT

(LO7-4) Accumulated depreciation is

A) An expense account.

B) An asset.

C) A contra-asset.

D) A liability.

7 CORRECT

(LO7-4) The original cost of a piece of equipment was $100,000. The equipment was depreciated using the straight-line method with annual depreciation of $20,000. After two years, the fair value of the equipment is $82,000. How much is...