Fundamental Accounting Principles Volume 2 17th Edition By Kermit D. Larson test bank

      






8)    SportsWorld purchased property for a building site. The costs associated with the property were:



Purchase Price
$175,000

Real Estate Commissions
$15,000

Legal Fees
$800

Expense of clearing land
$2,000

Expense to remove old building
$1,000


 What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?

      
       A) $150,000 to Land; $18,800 to Building 
       B) $190,000 to Land; $3,800 to Building
       C) $190,800 to Land; $3,000 to Building
       D) $192,800 to Land; $1,000 to Building
       E) $193,800 to Land; $0 to Building
      






9)    SportsWorld uses straight-line depreciation for a piece of equipment that cost $12,000. The asset had a salvage value of $2,000, and a five-year service life. At the end of the first year, an impairment loss of $2,000 was recognized on the asset. Calculate the amount of depreciation expense for each of the remaining years of the asset's useful life.

      
       A) $1,500    
       B) $1,600
       C) $2,500
       D) $1,800
       E) $2,000
      






10)  Sports Med sold an X-ray machine that originally cost $100,000 for $60,000. The accumulated depreciation on the machine to the date of sale was $40,000. On this sale, Sports Med should recognize:

      
       A) $0 gain or loss     
       B) $20,000 gain
       C) $25,000 gain
       D) $40,000 loss
       E) $60,000 gain
      






11)  Creek Construction purchased a machine for $26,000. It traded in an old machine and received a $4,200 trade-in allowance. The old machine costs $24,000 and had an accumulated depreciation of $16,000 to the date of trade-in. At what value should the new asset be recorded?

      
       A) $21,800  
       B) $24,000
       C) $26,000
       D) $29,800
       E) $30,200
      






12)  SportsWorld purchased a machine for $190,000. The machine has a useful life of 8 years and a residual value of $10,000. SportsWorld estimates that the machine could produce 750,000 units of product over its useful life. In the first year, 95,000 units were produced. In the second year, production increased to 111,000 units. Using the units-of-production method, what is the amount of depreciation that should be recorded for the second year?

      
       A) $26,640  
       B) $22,800
       C) $28,000
       D) $36,000
       E) $49,440
      






13)  SportsWorld purchased property for $100,000. The property included a building, parking lot, and land. The building was appraised at $65,000; the land at $40,000; and the parking lot at $10,000. To the nearest dollar, the value of the land to be recorded in the books should be

      
       A) $56,522  
       B) $40,000
       C) $34,783
       D) $36,364
       E) $48,696
      






14)  A machine costs $40,000 and had an accumulated depreciation of $30,000. It was traded in on a new machine, which had an estimated 20-year life and a cash price of $50,000. If a $7,000 trade-in allowance was received on the old machine, the new machine should be valued at