1.

A.
B.
C.
D.

Which of the following items would not be considered a long-lived asset?

Buildings
Land improvements
Inventory
Land

2.
A.
B.
C.
D.

Which of the following items would be classified as a land improvement?

Fence
Equipment
Prepaid expenses
Inventory

3. The American Co. spent $2,000 to purchase a long-lived asset, but incorrectly
recorded it as an expense. As a result, its:
A. Net income is overstated.
B. Assets are overstated.
C. Stockholders' equity is understated.
D. Revenues are overstated.
4. ABC Co. purchased a parcel of land for $300,000. It paid attorney fees of
$2,000 to verify title to the land. In addition, it paid a broker's fee of $5,000 to
help find a suitable parcel of land. This parcel of land should be recorded in
the accounting records for:
1. $300,000.
2. $302,000.
3. $305,000.
4. $307,000.
5. XYZ, Inc. purchased $100,000 of equipment, paying cash of $10,000, and
promising to pay the remainder in six months. As a result, its total assets:
A. Are increased by $100,000.
B. Are increased by $90,000.
C. Are decreased by $10,000.
D. Remain the same.
6. XYZ, Inc. purchased $100,000 of equipment, paying cash of $10,000, and
promising to pay the remainder in six months. As a result of acquiring the
equipment, its net income:
A. Increases by $90,000.
B. Decreases by $90,000.
C. Decreases by $10,000.
D. Remains the same.

7. On January 2, 2xx8, Baker Co. purchased equipment for $100,000. It has an

estimated useful life of five years, and its residual value is $10,000.
Depreciation expense for 2xx8 using the straight-line method is:
A. $18,000.
B. $20,000.
C. $36,000.
D. $40,000
8. On January 2, 2xx8, Baker Co. purchased equipment for $100,000. It has an
estimated useful life of five years, and its residual value is $10,000.
Depreciation expense for 2xx8 using the declining-balance method is:
A. $18,000.
B. $20,000.
C. $36,000.
D. $40,000.
9. On January 2, 2xx8, Baker Co. purchased equipment for $100,000. It has an
estimated useful life of five years, and its residual value is $10,000. If it uses
the declining balance method, what is the amount of accumulated depreciation
as of December 31, 2xx9?
A. $36,000
B. $40,000
C. $64,000
D. $80,000
10. In the first year that an asset is acquired:
A. The declining balance method results in the greatest amount of
depreciation expense and the greatest amount of assets.
B. The declining balance method results in the greatest amount of
depreciation expense and the least amount of assets.
C. The straight-line method of depreciation results in the greatest amount
o depreciation and the greatest amount of assets.
D. The straight-line method of depreciation results in the least amount of
depreciation and the least amount of assets.
11. Beta Co. recorded a loss due to impairment of some of its assets. As a result of
this journal entry:
A. Liabilities are increased.
B. Stockholders' equity is increased.
C. Total assets remain the same.
D. Total assets are decreased.

12. Universal Corp. sold a used piece of machinery for $12,000. At the time of the
sale, its book value was $9,000. As a result of this sale, total assets:
A.
B.
C.
D.

Increase by $12,000.
Decrease by $9,000.
Increase by $3,000.
Decrease by $3,000.