# Which of the following items is typically included in the cost

June 7, 2016

Question
Which of the following items is typically included in the cost of a capital asset?
i. purchase price
ii. shipping costs
iii. site preparation and set up costs
iv. legal costs associated with the purchase

.0/msohtmlclip1/01/clip_image002.png” alt=”http://edugen.wileyplus.com/edugen/art2/common/pixel.gif”>

i

i & ii

i, ii, & iii

i, ii, iii & iv

Darwin Company purchased machinery on January 1, 2007 for \$15,000. The machinery is estimated to have a three-year useful life with residual value of \$2,400. The machine will be used in the three years 2007, 2008, and 2009 to produce 3,000, 2,000, and 1,000 units respectively. If the company uses the units-of-activity method, what will be the accumulated depreciation for the machinery on December 31, 2008?

.0/msohtmlclip1/01/clip_image002.png” alt=”http://edugen.wileyplus.com/edugen/art2/common/pixel.gif”>

\$4,200

\$6,300

\$10,500

\$12,600

Question 4

Caricature’s Inc. bought new computers on January 1 for \$18,000 to improve the quality of their animation. The computers have a useful life of 8 years but Caricature’s Inc. thinks that continuing technology developments will likely mean they will replace the computers after 4 years, at which time they will be worth \$2,000. If they use straight-line depreciation, the depreciation expense for the first year will be

.0/msohtmlclip1/01/clip_image002.png” alt=”http://edugen.wileyplus.com/edugen/art2/common/pixel.gif”>

\$2,000.

\$2,250.

\$4,000.

\$4,500.

Question 5

A depreciable asset with a cost of \$42,500 has a residual value of \$2,500 and a useful life of 8 years. Total estimated units of output are 80,000 and in year 1; 5,200 units were produced. Under the straight-line method and the units-of-activity method the depreciation expense for the first year would be

Straight-line

Units-of-activity

.0/msohtmlclip1/01/clip_image002.png” alt=”http://edugen.wileyplus.com/edugen/art2/common/pixel.gif”>

\$5,000.00

\$2,600.00

\$5,000.00

\$2,762.50

\$5,312.50

\$2,600.00

\$5,312.50

\$2,762.50

.0/msohtmlclip1/01/clip_image005.png” alt=”http://edugen.wileyplus.com/edugen/art2/common/pixel.gif”>

Question 6

In 2017 as part of a property purchase, Melrose Ltd. incurred and paid 2016 property taxes. These costs should be

.0/msohtmlclip1/01/clip_image002.png” alt=”http://edugen.wileyplus.com/edugen/art2/common/pixel.gif”>

recognized as an impairment loss.

recognized on the Statement of Income as an expense.

recognized as a capital cost.

not be taken into consideration, these costs are irrelevant.

Question 7

Which of the following would not be capitalized as part of a purchased asset’s cost?

.0/msohtmlclip1/01/clip_image002.png” alt=”http://edugen.wileyplus.com/edugen/art2/common/pixel.gif”>

non-refundable taxes

installation cost

shipping costs

insurance costs

.0/msohtmlclip1/01/clip_image006.png” alt=”http://edugen.wileyplus.com/edugen/art2/common/pixel.gif”>

.0/msohtmlclip1/01/clip_image007.png” alt=”http://edugen.wileyplus.com/edugen/art2/common/pixel.gif”>

Question 8

On January 1, 2017, Bronson Co. purchased some equipment that initially cost \$52,800. Additional costs included freight costs \$300, non-refundable taxes \$6,400, and installation \$500. Estimated residual value is \$2,000. The company uses a straight-line rate of 10%. Depreciation expense for 2017 was

.0/msohtmlclip1/01/clip_image001.gif” alt=”http://edugen.wileyplus.com/edugen/art2/common/pixel.gif”>

\$6,130.

\$5,900.

\$5,800.

\$5,930.

Question 9

Which of the following costs associated with the purchase of an asset is/are not capitalized as part of the asset’s cost?

.0/msohtmlclip1/01/clip_image002.png” alt=”http://edugen.wileyplus.com/edugen/art2/common/pixel.gif”>

provincial sales tax

legal costs of purchase

transportation costs

all of the above costs are capitalized

Question 10

Which of the following is an example of an intangible with an indefinite life?

.0/msohtmlclip1/01/clip_image002.png” alt=”http://edugen.wileyplus.com/edugen/art2/common/pixel.gif”>