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    Multiple Choice: True False Answers

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    Carlo Paras
    When an ordinary repair occurs, the costs are usually expensed in the current period, but several periods may benefit from the repair. Companies must report gains or losses from involuntary asset disposals as extraordinary items. If a company scraps an asset without any cash recovery, it recognizes a loss equal to the asset's book value.

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    Multiple Choice: True False Answers

    Uploaded by

    Carlo Paras
    12 views3 pages
    When an ordinary repair occurs, the costs are usually expensed in the current period, but several periods may benefit from the repair. Companies must report gains or losses from involuntary asset disposals as extraordinary items. If a company scraps an asset without any cash recovery, it recognizes a loss equal to the asset's book value.

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    When an ordinary repair occurs, the costs are usually expensed in the current period, but several periods may benefit from the repair. Companies must report gains or losses from involuntary asset disposals as extraordinary items. If a company scraps an asset without any cash recovery, it recognizes a loss equal to the asset's book value.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    12 views3 pages

    Multiple Choice: True False Answers

    Uploaded by

    Carlo Paras
    When an ordinary repair occurs, the costs are usually expensed in the current period, but several periods may benefit from the repair. Companies must report gains or losses from involuntary asset disposals as extraordinary items. If a company scraps an asset without any cash recovery, it recognizes a loss equal to the asset's book value.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    18.When an ordinary repair occurs, several periods will usually benefit.

    19. Companies always treat gains or losses from an involuntary conversion as extraordinary
    items.

    20. If a company scraps an asset without any cash recovery, it recognizes a loss equal to
    the asset’s book value.

    True False Answers—Conceptual


    Item Ans. Item Ans. Item Ans. Item Ans.
    1. F 6. T 11. T 16. T
    2. T 7. F 12. T 17. T
    3. F 8. F 13. T 18. F
    4. T 9. F 14. F 19. F
    5. F 10. T 15. F 20. T

    MULTIPLE CHOICE—Conceptual
    21. Plant assets may properly include
    a. deposits on machinery not yet received.
    b. idle equipment awaiting sale.
    c. land held for possible use as a future plant site.
    d. none of these.

    22. Which of the following is not a major characteristic of a plant asset?


    a. Possesses physical substance
    b. Acquired for resale
    c. Acquired for use
    d. Yields services over a number of years

    23. Which of these is not a major characteristic of a plant asset?


    a. Possesses physical substance
    b. Acquired for use in operations
    c. Yields services over a number of years
    d. All of these are major characteristics of a plant asset.

    24. Cotton Hotel Corporation recently purchased Emporia Hotel and the land on which it is
    located with the plan to tear down the Emporia Hotel and build a new luxury hotel on the
    site. The cost of the Emporia Hotel should be
    a. depreciated over the period from acquisition to the date the hotel is scheduled to be
    torn down.
    b. written off as an extraordinary loss in the year the hotel is torn down.
    c. capitalized as part of the cost of the land.
    d. capitalized as part of the cost of the new hotel.
    25. The cost of land does not include
    a. costs of grading, filling, draining, and clearing.
    b. costs of removing old buildings.
    c. costs of improvements with limited lives.
    d. special assessments.

    26. The cost of land typically includes the purchase price and all of the following costs
    except
    a. grading, filling, draining, and clearing costs.
    b. street lights, sewers, and drainage systems cost.
    c. private driveways and parking lots.
    d. assumption of any liens or mortgages on the property.

    27. If a corporation purchases a lot and building and subsequently tears down the building
    and uses the property as a parking lot, the proper accounting treatment of the cost of the
    building would depend on
    a. the significance of the cost allocated to the building in relation to the combined cost
    of the lot and building.
    b. the length of time for which the building was held prior to its demolition.
    c. the contemplated future use of the parking lot.
    d. the intention of management for the property when the building was acquired.

    28. The debit for a sales tax properly levied and paid on the purchase of machinery
    preferably would be a charge to
    a. the machinery account.
    b. a separate deferred charge account.
    c. miscellaneous tax expense (which includes all taxes other than those on income).
    d. accumulated depreciation--machinery.

    29. Fences and parking lots are reported on the balance sheet as
    a. current assets.
    b. land improvements.
    c. land.
    d. property and equipment.
    S
    30. Historical cost is the basis advocated for recording the acquisition of property, plant, and
    equipment for all of the following reasons except
    a. at the date of acquisition, cost reflects fair market value.
    b. property, plant, and equipment items are always acquired at their original historical
    cost.
    c. historical cost involves actual transactions and, as such, is the most reliable basis.
    d. gains and losses should not be anticipated but should be recognized when the asset
    is sold.
    S
    31. To be consistent with the historical cost principle, overhead costs incurred by an
    enterprise constructing its own building should be
    a. allocated on the basis of lost production.
    b. eliminated completely from the cost of the asset.
    c. allocated on an opportunity cost basis.
    d. allocated on a pro rata basis between the asset and normal operations.

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