Reference no: EM131794112

Question 1:

Which of the following items is typically included in the cost of a capital asset?
i. purchase price
ii. shipping costs
iii. site preparation and set up costs
iv. legal costs associated with the purchase

i

i& ii

i, ii, & iii

i, ii, iii & iv

Question 2:

Darwin Company purchased machinery on January 1, 2007 for $15,000. The machinery is estimated to have a three-year useful life with residual value of $2,400. The machine will be used in the three years 2007, 2008, and 2009 to produce 3,000, 2,000, and 1,000 units respectively. If the company uses the units-of-activity method, what will be the accumulated depreciation for the machinery on December 31, 2008?

$4,200

$6,300

$10,500

$12,600

Question 3:

Caricature's Inc. bought new computers on January 1 for $18,000 to improve the quality of their animation. The computers have a useful life of 8 years but Caricature's Inc. thinks that continuing technology developments will likely mean they will replace the computers after 4 years, at which time they will be worth $2,000. If they use straight-line depreciation, the depreciation expense for the first year will be

$2,000.

$2,250.

$4,000.

$4,500.

Question 4:

A depreciable asset with a cost of $42,500 has a residual value of $2,500 and a useful life of 8 years. Total estimated units of output are 80,000 and in year 1; 5,200 units were produced. Under the straight-line method and the units-of-activity method the depreciation expense for the first year would be

Straight-line

Units-of-activity

$5,000.00 $2,600.00

$5,000.00 $2,762.50

$5,312.50 $2,600.00

$5,312.50 $2,762.50

Question 6:

In 2017 as part of a property purchase, Melrose Ltd. incurred and paid 2016 property taxes. These costs should be

recognized as an impairment loss.

recognized on the Statement of Income as an expense.

recognized as a capital cost.

not be taken into consideration, these costs are irrelevant.

Question 7:

Which of the following would not be capitalized as part of a purchased asset's cost?

non-refundable taxes

installation cost

shipping costs

insurance costs

Question 8:

On January 1, 2017, Bronson Co. purchased some equipment that initially cost $52,800. Additional costs included freight costs $300, non-refundable taxes $6,400, and installation $500. Estimated residual value is $2,000. The company uses a straight-line rate of 10%. Depreciation expense for 2017 was

$6,130.

$5,900.

$5,800.

$5,930.

Question 9:

Which of the following costs associated with the purchase of an asset is/are not capitalized as part of the asset's cost?

provincial sales tax

legal costs of purchase

transportation costs

all of the above costs are capitalized

Question 10:

Which of the following is an example of an intangible with an indefinite life?

A copyright on a song.

A patent on a new technology.

The development costs of a new drug.

The goodwill value assigned to the excess purchase price when purchasing a company.