Question 1 (4 points)Mountain Milk Co. acquired land, buildings, and equipment for a lump sum price of $210,000. At the ...

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ACCT 310-Mountain Milk Co. acquired land, buildings

April 14, 2018

Question 1 (4 points)

Mountain Milk Co. acquired land, buildings, and equipment for a lump sum price of $210,000. At the time of acquisition, the land was appraised at $80,000, the buildings at $100,000, and the equipment at $60,000. The cost that should be assigned to the equipment is:

  • $52,500
  • $87,000
  • $60,000
  • $70,000

Question 2 (4 points)

In constructing a warehouse for its own use, Ridgeway Company incurred material costs of $25,000, direct labor costs of $60,000, and interest on funds borrowed for construction of $7,200. Ridgeway’s fixed overheat rate is 40% of direct labor. Ridgeway was operating at full capacity during the construction. An outside contractor had bid $120,000 to build the warehouse. The capitalized cost of the warehouse should be:

  • $120,000
  • $116,200
  • $109,000
  • $92,200

Question 3 (4 points)

A company had the following information for the current year:

Beginning inventory: $50,000

Purchases: $45,000

Purchase returns: $3,000

Freight-in: $2,000

Freight-out: $1,000

Ending inventory: $37,000

The amount of cost of goods sold for the current year is:

  • $55,000
  • $56,000
  • $57,000
  • $58,000

Question 4 (4 points)

Which inventory cost flow method more closely matches the current cost of replacing inventory with the cost of goods sold when prices are changing?

  • LIFO
  • FIFO
  • Weighted-Average
  • Not enough information to determine

Question 5 (4 points)

In a periodic inventory system, to what account are purchases debited?

InventoryCost of Goods SoldPurchasesAccounts PayableTrue

False

Question 9 (2 points)

The LIFO perpetual and LIFO periodic methods usually resulting different ending inventory values if sales and purchases are made throughout the month.

  • True
  • False

Question 10 (2 points)

If a company acquires two assets in a lump sum purchase, it should capitalize each asset at its fair value.

  • True
  • False

Question 11 (2 points)

An asset acquired by a deferred payment plan may be recorded at the present value of the deferred payments, which is determined by discounting the payments at an appropriate rate of interest.

  • True
  • False

Question 12 (2points)

If an exchange of nonmonetary assets lacks commercial substance, a company must recognize a loss in full on the exchange but gains only to the extent that cash is involved.

TrueFalseA physical inventory count should be made at least once a year.The Merchandise Inventory account in the year-end trial balance represents ending inventory.The inventory account in the year-end trial balance represents beginning inventory.Material freight-in costs should be treated as an inventory cost.

Question 14 (2 points)

The Osage Company uses the sum-of-the-years’ digits method of depreciation and computes depreciation to the nearest whole year. What amount should Osage record for second-year depreciation of a chain saw (purchased in April) costing $500, with an expected life of 5 years and an expected residual value of $50.

  • $120
  • $150
  • $100
  • $132

Question 15 (2 points)

Company A and Company B each purchased a $50,000 asset with an expected life of 10 years on January 1, 2011. Company A uses the straight-line method, and Company B uses the double-declining balance method. Each company has the same sales and expenses other than the depreciation on this asset in 2011. Which of the following statements is true?

  • Company A’s method is appropriate for an asset whose benefits are expected to decline over the periods of use.
  • Company B’s 2011 net income is lower than Company A’s.
  • Company A and Company B has the same net income.
  • Company B uses an activity method of depreciation.

Question 16 (2 points)

The depreciable cost of an asset does not include:

  • Maintenance costs
  • Acquisition costs
  • Installation costs
  • Cost of preparation for use










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