1. Question : Renault Marina exchanged a boat with a cost of $80,000 (now 75% depreciated) for another boat with a current fair value of $27,000. No boat was paid for or received. The new boat will perform the exact same function as the old boat. Renault should record the new boat at Student Answer: $20,000 $27,000 $7,000 $0 2. Question : The sale of a depreciable asset resulting in a gain indicates that the proceeds from the sale were Student Answer: less than current market value greater than cost greater than book value less than book value 3. Question : Robards Services exchanged an asset with a cost of $24,000 (now 40% depreciated) for a nonmonetary asset worth $12,000. Robards received $2,000 boot. In the entry to record this exchange, Robards should record Student Answer: a $10,000 loss a $400 gain no gain or loss a $400 loss 4. Question : Remy purchases a new machine by issuing an $18,000 three-year note. The company will pay off the obligation by paying $6,000 at the end of each year. The market rate for obligations of this type is 8%. The present value of an annuity at 8% for three periods is 2.577097. The machine will be recorded at a cost of Student Answer: $ 6,000.00 $ 9,462.58 $15,462.58 $18,000.00 5. Question : According to GAAP, interest must be capitalized for Student Answer: assets that are ready for use assets constructed for a firm’s own use assets that are not being used in the earning activities of the company inventories that are produced in large quantities on a repetitive basis 6. Question : Macey Co. exchanged a piece of equipment that had cost $40,000 (now 75% depreciated) for a truck with a current appraised value of $13,000. Macey Co. gave the other company the piece of equipment and $8,000. Macey Co. should record Student Answer: a $5,000 loss the truck at $18,000 a gain of $11,000 the truck at $21,000 7. Question : Early in 2010, Roper, Inc. purchased certain plant assets under a deferred payment contract. The agreement was to pay $50,000 at year-end for each of the next three years. The plant assets should be valued at Student Answer: present value of a $50,000 annuity for three years discounted at the bank prime interest rate $150,000 present value of a $50,000 annuity for three years discounted at the market interest rate $150,000 plus imputed interest 8. Question : On May 15, 2010, Retread Company acquired a new forklift in exchange for an old forklift that it had acquired in 2000. The old forklift was purchased for $20,000 and had a book value of $5,000. On the date of the exchange, the old forklift had a market value of $6,000. In addition, Retread paid $18,000 cash for the new forklift, which had a list price of $25,000. At what amount should Retread record the new forklift for financial accounting purposes? Student Answer: $23,000 $24,000 $20,000 $25,000 9. Question : The costs of drilling an unsuccessful well are expensed under Student Answer: the successful-efforts method the full-cost method both the successful-efforts method and the full-cost method neither the successful-efforts method nor the full-cost method 10. Question : All of the following would be classified as property, plant, and equipment except Student Answer: office buildings machinery owned for standby purposes equipment held for resale equipment used in the operation of the business

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