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Multiple Choice

1- A company purchased land for $70,000 cash. Real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Under the cost principle, the cost of land would be recorded at
a. $77,000.
b. $70,000.
c. $75,000.
d. $82,000.

2-A company purchased a delivery truck on January 1, 2005, for $18,000. It is estimated that the delivery truck will have a $4,000 salvage value at the end of its 5-year useful life. If the company recorded depreciation expense of $2,800 for the year 2006 on the delivery truck, the depreciation method used by the company is
a. not determinable.
b. the straight-line method.
c. the units-of-activity method.
d. the double-declining-balance method.
3- Anne Company has total cash register receipts of $6,825. This total includes a 5% sales tax. The entry to record the receipts will include a
a. debit to Sales Tax Expense for $325.
b. credit to Sales for $6,000.
c. credit to Sales Taxes Payable for $825.
d. credit to Sales Taxes Payable for $325.
4-$200,000, 5%, 20-year bond was issued at 99. The proceeds received from the bond issuance are
a. $200,000.
b. $198,000.
c. $204,000.
d. $196,000.
5- A corporation issued $600,000 of 6%, 5-year bonds on January 1, at 102. Interest is paid semiannually on January 1 and July 1. If the corporation uses the straight-line method of amortization, the amount of bond interest expense to be recognized on July 1 is
a. $36,000.
b. $18,000.
c. $19,200.
d. $16,800.

Solution Preview

1. The cost of land is all expenses incurred in getting the land ready for use. The real estate brokers commission and the amount spent in demolishing the building would be added to the cost of land. The cost of land would be 70,000+5,000+7,000=$82,000

2. Under the straight line method, the ...

Solution Summary

The solution explains some multiple choice questions relating to depreciation, cash receipts and bonds

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