Question :
31. During Year 3, Carrington Company made the following expenditures relating : 1245666
31. During Year 3, Carrington Company made the following expenditures relating to plant machinery and equipment:
·
Continuing, frequent, and low cost repairs
$46,000
·
Special long-term protection devices were attached to ten machines
11,000
·
A broken gear on a machine was replaced
5,000
How much should be charged to repairs and maintenance in Year 3?
A. $46,000
B. $51,000
C. $57,000
D. $41,000
E. none of the above
32. Which of the following is/are not capitalized as an intangible asset?
A. costs of an internally developed patent
B. legal costs to defend a patent successfully
C. goodwill acquired when a company purchases another company
D. costs to purchase a patent
E. none of the above
33. Repairs and maintenance do not include
A. the costs of restoring an asset’s service potential after breakdowns.
B. expenditures that increase the asset’s life.
C. routine costs such as for cleaning and adjusting.
D. major tune-ups including labor and parts.
E. All of the above are not considered to be repairs or maintenance.
34. Flagler Corporation replaces a roof damaged in a hurricane. The new roof is purposefully designed to be stronger than the old one so that it will support the air conditioning equipment the firm plans to install. Which of the following is/are true?
A. Part of the expenditure represents repair and part represents improvement.
B. The expenditure represents repair, only.
C. The expenditure represents improvement, only.
D. The expenditure represents asset, only.
E. The expenditure represents expense, only.
35. Firms often incur costs to maintain, repair, and improve their tangible assets. U.S. GAAP and IFRS require firms to treat expenditures for _____ as _____ as incurred but _____ treat as _____.
A. maintenance and repairs; expenses of the period; expenditures for improvements; assets
B. maintenance and repairs; assets; expenditures for improvements; expenses of the period
C. maintenance and repairs; expenses of the period; expenditures for improvements; liabilities
D. maintenance and repairs; liabilities; expenditures for improvements; expenses of the period
E. maintenance and repairs; assets; expenditures for improvements; liabilities
36. Which of the following is/are not true regarding maintenance?
A. Maintenance includes routine costs such as for cleaning and adjusting.
B. Maintenance includes the costs of restoring an asset’s service potential after breakdowns or other damage.
C. Maintenance does not extend the estimated service life or increase its productive capacity of an asset beyond original expectations.
D. U.S. GAAP and IFRS treat maintenance expenditures as expenses of the period when the firm makes the expenditure.
E. Distinguishing repairs from maintenance is difficult but typically not necessary because expenditures for both are period expenses.
37. Which of the following is/are not true regarding repairs?
A. Repairs include routine costs such as for cleaning and adjusting.
B. Repairs include the costs of restoring an asset’s service potential after breakdowns or other damage.
C. Repairs do not extend the estimated service life or increase its productive capacity of an asset beyond original expectations.
D. U.S. GAAP and IFRS treat repair expenditures as expenses of the period when the firm makes the expenditure.
E. Distinguishing repairs from maintenance is difficult but typically not necessary because expenditures for both are period expenses.
38. Which of the following is not true regarding expenditures for improvements?
A. Improvements are sometimes called betterments.
B. Improvements may increase an asset’s performance by increasing the service life.
C. Improvements may increase an asset’s performance by reducing the operating costs.
D. Improvements may increase an asset’s performance by increasing the rate of output.
E. When the firm makes the expenditure for improvements, it recognizes the cost of the improvement by debiting the Improvement Expense account.
39. Which of the following is/are not true regarding expenditures for improvements?
A. Improvements are sometimes called betterments.
B. Improvements may increase an asset’s performance by increasing the service life.
C. Improvements may increase an asset’s performance by reducing the operating costs.
D. Improvements may increase an asset’s performance by increasing the rate of output.
E. none of the above
40. Sigma Company suffers a loss to its building in a fire and spends $100,000 on repairs and improvements. It judges that $80,000 of the expenditure replaces long-lived assets lost in the fire, and $20,000 represents improvements to the building. Which of the following is the single journal entry that Sigma Company will make?
A. Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
B. Loss from Fire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
C. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Loss from Fire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000
D. Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Loss from Fire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
E. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Loss from Fire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
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