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Which of the following should be included in
the cost of land?
A) Construction
cost of a parking lot
B) Landscaping
C) Real
estate brokerage commission
D) Lighting
7.1-22 Which of the following should be included in
the cost of land?
A) Costs of
grading and clearing the land
B) Costs of
removing an unwanted building
C) Cost of
fencing
D) Both A and
B
7.1-23 Which of the following is NOT an intangible asset? A)
Copyright
B. Goodwill
C) Patent
D) Mineral
rights
Copyright 2010 Pearson Education Inc. Publishing as Prentice Hall. 6
7.1-24 The cost of
installing shrubbery should be recorded as:
A) land.
B) land
improvements.
C) land
maintenance expense.
D) land
improvement expense.
7.1-25 Although located on the land, they are subject to decay and
their cost is depreciated. This is the definition of:
A) land
improvement.
B) plant and
equipment.
C) a
building.
D) land.
7.1-26 The cost of assets acquired in a lump-sum purchase must be
allocated using which method? A) Book-value method
B Cost method
C. Per capita
method
D. Relative-sales-value-method
Copyright 2010 Pearson Education Inc. Publishing as Prentice Hall. 7
7.1-27 Land, buildings and equipment are
acquired for a lump sum of $875,000. The market values of the three assets are,
respectively, $200,000, $500,000 and $300,000. What is the cost assigned to the
equipment?
A) $250,000
B) $262,500
C) $300,000
D) $342,857
7.1-28 Land is purchased for $62,500. Back taxes paid by the
purchaser were $7,500; total costs to demolish an existing building were
$11,000; fencing costs were $12,500; and lighting costs were $1,500. What is
the cost of the land?
A) $62,500
B) $81,000
C) $93,500
D) $95,000
7.1-29 Which of the following should be included in
the Machinery account?
A) The cost
of transporting the machinery to its setup location
B) The cost
of a maintenance insurance plan after the machinery is up and running
C) The cost
of calibrating the machinery after it has been used for a year
D) The cost
of insurance while the machinery is being overhauled
8
7.1-30
Morton Corporation purchased equipment for $46,000. Morton also paid $1,200 for
freight and insurance while the equipment was in transit. Sales tax amounted to
$850. Insurance, taxes and maintenance for the first year of use was $1,000.
How much should Morton Corporation capitalize as the cost of the equipment?
A) $46,000
B) $46,850
C) $48,050
D) $49,050
