Reference no: EM132762353
Questions -
Q1. Land was purchased to be used as the site for the construction of a plant. A building on the property was sold and removed by the buyer so that construction on the plant could begin. The proceeds from the sale of the building should be
a. netted against the costs to to clear the land and debited to an expense account as incurred
b. Netted against the costs to cleared the land, then added to the building costs and amortized over the life of the plant
c. Classified as other income
d. Deducted from the cost of the land
Q2. During 2020 Fox Company spent the following amounts related to machinery and equipment:
They overhauled and rearranged a group of machines at a cost of $50,000 to secure greater efficiency over the remaining 5 year life. The project was completed December 31, 2020.
They did ongoing repairs and maintenance at a cost of $35,000
They replaced a broken gear on one of the machines for $5,000
How much of the costs above should be charged to repairs and maintenance in 2020?
a. 35,000
b. 40,000
c. 85,000
d. 90,000
Q3. Which of the following items is consistent with the FASB's definition of a liability?
a. Any account with a credit balance after the closing entries are made
b. Deferred credits recognized and measured in conformity with generally accepted accounting principles
c. Obligations to transfer stock ownership shares to other entities in the future
d. Obligations to clean up toxic waste from a oil processing plant. Oil was spilled on the property last year, but the company does not have to remove the residue until it shuts down the plant in four years time.
Q4. An employee earns $300 per day. They are rarely sick and have accumulated 60 days of sick leave. The company allows employees to receive a cash payout for up to 20 days of sick leave when they retire. The employee will not retire for 5 more years when wages are expected to be $350 per day. Under current accounting standards the minimum amount the company need to report as a liability to this employee under the sick leave program is
a. Zero
b. 20 X $300 = $6000
c. 60 X $300 = 1$8,000
d. 60 X $350 = $21,000
Q5. A company had a special promotion where 'sales tax was included in thequoted price'. They took in cash dollars of $100,000 during the special. The normal sales tax rate is 10% in their area. How would they record this transaction on the seller's books?
a. dr. Cash 90,000
dr. Sales Tax expense 10,000
cr. Sales 100,000
b. Dr. Cash 100,000
Cr. Sales Taxes Payable 10,000
Cr. Sales 90,000
c. Dr. Cash 90,909
Dr. Sales tax expense 9091
Cr. Sales 100,000
d. Dr. Cash 100,000
Cr. Sales Tax Payable 9 ,091
Cr. Sales 90,900