Question :
41. On March 1, Wright Company purchased new equipment for $50,000 : 1228541
41. On March 1, Wright Company purchased new equipment for $50,000 by paying cash. Other costs associated with the equipment were: transportation costs, $1,000; sales tax paid $3,000; and installation cost, $2,500. At what amount will the equipment be recorded at on a balance sheet?
A. $56,500
B. $54,000
C. $51,000
D. $50,000
42. On August 1, Red Company purchased computer equipment for $10,000 cash and also gave 100 shares of White common stock held by Red Company as an investment. The White common stock cost Red Company $5,000 and on August 1 had a market value of $4,200. Installation costs were $700 and shipping costs were $500. What amount should be the total amount debited to the computer equipment account?
A. $14,200
B. $15,000
C. $15,400
D. $16,200
43. Salvia Company recently purchased a truck. The price negotiated with the dealer was $40,000. Salvia also paid sales tax of $2,000 on the purchase, shipping and preparation costs of $3,000, and insurance for the first year of operation of $4,000. At what amount should the truck be recorded on the balance sheet prior to recording depreciation expense?
A. $40,000
B. $42,000
C. $43,000
D. $45,000
44. Which of the following equipment related costs is not capitalized on a balance sheet?
A. Equipment installation costs.
B. Transportation costs associated with the equipment purchase.
C. Equipment maintenance costs.
D. The equipment’s purchase price.
45. Which of the following costs associated with a land purchase is not a component of the land cost reported on a balance sheet?
A. The payment of delinquent property taxes.
B. The incurrence of legal fees.
C. The cost of title insurance.
D. The land’s appraised value.
46. Which of the following is correct for Smith Company when Smith issues 10,000 shares of $10 par value common stock and pays $20,000 cash in exchange for a building? The market price of the Smith stock on the exchange date was $35 per share and the building’s book value on the books of the seller was $200,000.
A. Total assets increase $350,000.
B. Stockholders’ equity increases $200,000.
C. Stockholders’ equity increases $330,000.
D. Total assets increase $330,000.
47. Which of the following is incorrect for Smith Company when Smith issues 10,000 shares of $10 par value common stock and pays $20,000 cash in exchange for a building? The market price of the Smith stock on the exchange date was $35 per share and the building’s book value on the books of the seller was $200,000.
A. The common stock account increases by $100,000.
B. The building account increases by $350,000.
C. Stockholders’ equity increases $350,000.
D. The additional paid-in capital account increases by $250,000.
48. Which of the following journal entries is correct for Smith Company when Smith issues 10,000 shares of $20 par value common stock and pays $20,000 cash in exchange for a building? The market price of the Smith stock on the exchange date was $35 per share and the building’s book value on the books of the seller was $200,000.
A. Building 220,000
Cash 20,000 Common stock 200,000
B. Building 370,000
Cash 20,000 Common Stock 350,000
C. Building 370,000
Cash 20,000 Common stock 200,000 Additional paid-in capital 150,000
D. Building 200,000
Common stock 200,000
49. If an expenditure related to a depreciable asset is incorrectly treated as a capital expenditure, instead of as a revenue expenditure, which of the following statements is true?
A. The current year’s net income will be lower and future depreciation expense will be higher.
B. The current year’s net income will be higher and future depreciation expense will be lower.
C. The current year’s net income will be higher and future depreciation expense will be higher.
D. The current year’s net income will be lower and future depreciation expense will be lower.
50. Which of the following statements is incorrect?
A. Revenue expenditures decrease net income.
B. Capital expenditures decrease assets.
C. Ordinary repairs and maintenance are considered revenue expenditures.
D. Additions and improvements are considered capital expenditures.
