accounting for managerial decisions

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Topic 5 Homework Questions – Solution

1. Resources that are used in operations for more than one year with no physical

substance are called:

a. current assets

b. intangible assets

c. non-current assets

d. property, plant and equipment

2. Able Company purchased land and incurred the following costs:

Purchase price $1 000 000

Excavation costs 100 000

Removing old building 25 000

Broker fees 20 000

Cost of a parking lot 50 000

What is the cost of the land?

a. $1 100 000

b. $1 195 000

c. $1 145 000

d. $1 125 000

3. Which of the following costs related to the purchase of production equipment

incurred by ABC Company during 2013 would be considered an expense (revenue
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not be amortised, but should be reviewed annually for impairment

b. be reported on the statement of retained earnings in the year in which acquired

c. be amortised over a reasonable period of time, not to exceed 40 years

d. be debited to an expense account entirely in the year in which acquired

6. Information for Everett Evacuators for 2013 and 2012 is presented below. Everett

uses the straight-line depreciation method.

2013 2012

Non-current assets $250 000 $190 000

Accumulated depreciation 100 000 85 000

Depreciation expense 62 500 47 500

Total revenues 1 000 000 900 000

Total assets 625 000 475 000

Using the data for 2013, determine the average useful life of Everett 's non-current assets

rounded to one decimal place.

a. 1.6 years

b. 2.5 years

c. 4.0 years

d. 10.0 years

7. On 1 July 2013, XYZ sold a piece of equipment for $30 000 which it had used for

several years. The equipment had cost $45 000 and its accumulated depreciation

amounted to $20 000 at the time of the sale. What are the net effects on the

accounting equation of selling the equipment?

a. Assets and equity increase $30 000

b. Assets decrease and equity increases $5 000

c. Assets and equity increase $5 000

d. Assets and equity decrease $5 000

8. Wong purchased equipment at the beginning of
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