ACCT 305 WEEK 1 QUIZ

ACCT 305 WEEK 1 QUIZ

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1. Question :        (TCO 1) The capitalized cost of equipment excludes:

1. Maintenance.
2. Sales tax.
3. Shipping.
4. Installation.

2. Question :     (TCO 1) Simpson and Homer Corporation acquired an office building on three acres of land for a lump-sum price of $2,400,000. The building was completely furnished. According to independent appraisals, the fair values were $1,300,000, $780,000, and $520,000 for the building, land, and furniture and fixtures, respectively. The initial values of the building, land, and furniture and fixtures would be:

1. Option a
2. (building 1,200,000/ Land 720,000 / Fixtures 480,000)
3. Option c
4. Option d

3. Question :     (TCO 3) In a nonmonetary exchange of equipment, if the exchange has commercial substance, a gain is recognized if:

1. The fair value of the equipment received exceeds the book value of the equipment received.
2. The book value of the equipment received exceeds the fair value of the equipment given up.
3. The fair value of the equipment surrendered exceeds the book value of the equipment given up.
4. None of the above is correct.

4. Question :  (TCO 1) Interest is eligible to be capitalized as part of an asset’s cost, rather than being expensed immediately, when:

1. The interest is incurred during the construction period of the asset.
2. The asset is a discrete construction project for sale or lease.
3. The asset is self-constructed, rather than acquired.
4. All of the above are correct.

5. Question: (TCO 3) Alamos Co. exchanged equipment and $18,000 cash for similar equipment. The book value and the fair value of the old equipment were $82,000 and $90,000, respectively.

Assuming that the exchange has commercial substance, Alamos would record a gain/(loss) of:

1. $26,000.
2. $8,000.
3. $(8,000).
4. $0.