MiniTest Session 2 PA SBS

When purchasing land, the costs for clearing, draining, filling, and grading should be charged to a Land Improvements account.

• True
• False

Using the units-of-activity method of depreciating factory equipment will generally result in more depreciation expense being recorded over the life of the asset than if the straight-line method had been used.

• True
• False

Once an asset is fully depreciated, no additional depreciation can be taken even though the asset is still being used by the business.

• True
• False

If an acquired franchise or license has an indefinite life, the cost of the asset is not amortized.

• True
• False

If a plant asset is sold at a gain, the gain on disposal should reduce the cost of goods sold section of the income statement.

• True
• False

A company purchased land for $90,000 cash. Real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Under the cost principle, the cost of land would be recorded at

• $97,000.
• $90,000.
• $95,000.
• $102,000.

Which one of the following items is not considered a part of the cost of a truck purchased for business use?

• Sales tax
• Truck license
• Freight charges
• Cost of lettering on side of truck

Pine Company acquires land for $86,000 cash. Additional costs are as follows: Removal of shed $ 300 Filling and grading 1,500 Salvage value of lumber of shed 120 Broker commission 1,130 Paving of parking lot 10,000 Closing costs 560 Pine will record the acquisition cost of the land as

• $86,000.
• $87,690.
• $89,610.
• $89,370.

Shawnee Hospital installs a new parking lot. The paving cost $30,000 and the lights to illuminate the new parking area cost $15,000. Which of the following statements is true with respect to these additions?

• $30,000 should be debited to the Land account.
• $15,000 should be debited to Land Improvements.
• $45,000 should be debited to the Land account.
• $45,000 should be debited to Land Improvements.

Carley Company purchases a new delivery truck for $45,000. The sales taxes are $3,000. The logo of the company is painted on the side of the truck for $1,200. The truck license is $120. The truck undergoes safety testing for $220. What does Carley record as the cost of the new truck?

• $49,540
• $49,420
• $48,000
• $47,420