Accounting Questions Quiz

Smatter Corporation purchased land for a new building. Which of the following costs would not be included in the cost of the land?

• Purchase price of the land

• Brokerage commission paid to the real estate agent who handled the land transaction

• Cost of new parking lot constructed on the land

• Cost of demolishing an old garage located on the land

Whitmore Corporation purchased a new delivery van on the last day of its fiscal year. The cost of the delivery van will appear on Whitmore's _______ in the year of purchase.

• Balance sheet

• Income statement

• Statement of stockholders' equity

• Cash flow statement

• Statement of retained earnings

When a company expenses the cost of maintenance for its heating and cooling system, that cost will appear on its

• Statement of stockholders' equity

• Income statement

• Balance sheet

• Statement of retained earnings

Capitalizing a cost involves increasing what type of account?

• Stockholders' equity

• Asset

• Expense

• Liability

A capital expenditure

• records additional capital.

• is expensed immediately.

• is a credit like capital (equity).

• adds to an asset.

Which of the following items should be accounted for as a capital expenditure?

• Taxes paid in conjunction with the purchase of office equipment

• Costs incurred to repair leaks in a building's roof

• The monthly rental cost of an office building

• Maintenance fees paid with funds provided by the company's capital

Cropper Company purchased a delivery van for $35,000 on January 1. The van has an estimated 5-year life with a residual value of $8,000. What would the depreciation expense for this van be in the first year if Cropper uses the straight-line method?

• $27,000

• $5,400

• $7,000

• $35,000

Bell Corporation purchased a forklift for $60,000 on July 1. The forklift has an estimated useful life of 35,000 usage hours with a residual value of $4,000. Bell uses the units-of-production method for depreciation. If Bell uses the forklift for 6,000 hours during the first year, the depreciation expense on the forklift would be (Round intermediary calculations to two decimal places and your final answers to the nearest whole dollar.)

• $60,000

• $10,286

• $9,600

• $4,000

On the first day of its fiscal year, Counterbalance Company purchased a new computer system for a total cost of $40,000. The computer system is expected to have a life of 10 years with a residual value of $7,000. If the company uses the double-declining-balance method, its depreciation expense for this computer system in the first year will be

The depreciation method that does not initially use the residual value in depreciation calculations is the

• direct method.

• double-declining balance method.

• straight-line method.

• units-of-production method.