Acc 291

1. A company purchases a remote site building for computer operations. The building will be suitable for operations after some expenditures. The wiring must be replaced to computer specifications. The roof is leaky and must be replaced. All rooms must be repaired and re-carpeted and there will also be some plumbing work done.Which of the following statements is true.

a. the cost of the building will include the cost of replacing the roof

b. the cost of the building is the purchase price of the building, while the additional expenditures are all capitalized as Building improvements.

c. the wiring is part of the computer costs, not the building cost

d. the cost of the building will not include the re-carpeting cost

2. All of the following factors in computing depreciation are estimates except

a. useful life

b. cost

c. residual value

d. selvedge value

3. Accountants do not attempt to measure the change in the plant asset's market value during ownership because

a. losses would have to be recognized

b. the assets are not held for resale

c. plant assets can not be sold

d. it is management's responsibility to determine fair values

4. In computing depreciation, selvedge value is

a. the fair market value of a plant asset on the date of acquisition

b. ignored in all the depreciation methods

c. subtracted from accumulated depreciation to determine the plant asset's depreciable cost

d. an estimate of a plant asset's value at the end of its useful life

5. Useful life is expressed in terms of use expected from the asset under the

a. declining-balance method

b. straight-line method

c. units-of-activity method

d. none of these

6. Management should select the depreciation method that

a. best measures the plant asset's market value over its useful life

b. best measure the plant asset's contribution to revenue over its useful life

c. has been used most often in the past by the company.

d. is easiest to apply

7. A change in the estimated useful life of equipment requires

a. that the amount of periodic depreciation be changed in the current year and in future years

b. that income for the current year be increased

c. that no change be made in the periodic depreciation so that depreciation amounts are comparable over the life of the asset

d. a retroactive change in the amount of periodic depreciation recognized in the previous year

8. Additions and improvements

a. typically only benefit the current accounting period

b. normally involve immaterial expenditures

c. increase the book value of the plant assets when