1. On-call services Corporation bought a building lot to construct a new corporate office building. An older home on the building lot razed immediately so that the office building could be constructed. The cost of purchasing the older home should be:
a. recorded as part of the cost of the land
b. written off as a loss in the year of purchase
c. written off as an extraordinary item in the year of purchase
d. recorded as part of the cost of the new building
2. In a business combination, good will is defined as the excess of cost over the
a. net book value of assets acquired
b. fair value of assets acquired
c. book value of assets acquired less the liabilities assumed
d. fair value of assets acquired less the liabilities assumed
3. Goodwill should be recorded in the accounting records only when
a. it is purchased from another company
b. it can be established that a definite benefit or advantage has resulted to a firm from some item such as a good name, capable staff, or reputation
c. it is acquired through the purchase of another business entity
d. a firm reports above normal earnings for five or more consecutive years
4.Donated equipment for which the fair value has been determined should be recorded as a debit to the appropriate equipment account and a credit to
a. other income
b. retained earnings
c. capital stock
d. revenue or gain
5.When a company purchases land with a building on it and immediately tears down the building so that the land can be used for the construction of a plant, the costs incurred to tear down the building should be
a. amortized over the estimated time period between the tearing down of the building and the completion of the plant
b. expensed as incurred
c. added to the cost of the plant
d. added to the cost of the land
6. Which of the follwing principles best describes the current method of accounting for research and development costs?
a. immediate recognition as expense
b. systematic and rational allocation
c. income tax minimization
d. associating cause and effect