ACCT 305 Week 1 Quiz
1. Question : (TCO 1) The capitalized cost of equipment excludes:
- Sales tax.
2. Question : (TCO 1) Simpson and Homer Corporation acquired an office building on three acres of land for a lump-sum price of $2,400,000. The building was completely furnished. According to independent appraisals, the fair values were $1,300,000, $780,000, and $520,000 for the building, land, and furniture and fixtures, respectively. The initial values of the building, land, and furniture and fixtures would be:
- Option a
- (building 1,200,000/ Land 720,000 / Fixtures 480,000)
- Option c
- Option d
3. Question : (TCO 3) In a nonmonetary exchange of equipment, if the exchange has commercial substance, a gain is recognized if:
- The fair value of the equipment received exceeds the book value of the equipment received.
- The book value of the equipment received exceeds the fair value of the equipment given up.
- The fair value of the equipment surrendered exceeds the book value of the equipment given up.
- None of the above is correct.
4. Question : (TCO 1) Interest is eligible to be capitalized as part of an asset’s cost, rather than being expensed immediately, when:
- The interest is incurred during the construction period of the asset.
- The asset is a discrete construction project for sale or lease.
- The asset is self-constructed, rather than acquired.
- All of the above are correct.
5. Question: (TCO 3) Alamos Co. exchanged equipment and $18,000 cash for similar equipment. The book value and the fair value of the old equipment were $82,000 and $90,000, respectively.
Assuming that the exchange has commercial substance, Alamos would record a gain/(loss) of: