The replacement of a major component increased the productive capacity of equipment from 10 units per hour to 18 units per hour

The replacement of a major component increased the productive capacity of equipment from 10 units per hour to 18 units per hour. The expenditure for the replacement component should be debited to:

A) Repairs Expense.

B) Maintenance Expense.

C) Equipment.

D) Gain from Repairs.

Answer: C

Which of the following subsequent expenditures would not be capitalized?

A) Unsuccessful legal defense of intangible assets.

B) Additions.

C) Improvements.

D) Successful legal defense of intangible assets.

Answer: A

Which of the following statements accurately describes depreciation?

I. Depreciation is used to allocate the cost of the asset over periods benefited.

II. Depreciation is used to track the fair value of the asset.

III. The book value of an asset is its original cost less accumulated depreciation.

A) I and III

B) I and II

C) II and III

D) All of these statements are correct.

Answer: A

The cost of an engine tune-up is an example of which of the following expenditures after acquisition?

A) Ordinary repairs and maintenance.

B) Additions.

C) Improvements.

D) Capitalized costs.

Answer: A

Which of the following subsequent expenditures would not be capitalized?

A) Ordinary repairs and maintenance.

B) Additions.

C) Improvements.

D) Successful legal defense of intangible assets.

Answer: A

The cost of replacing a major component on a piece of equipment is an example of:

A) Repairs and maintenance.

B) Improvements.

C) Additions.

D) An expenditure that only benefits the current period.

Answer: B

The company believes that these efforts have increased the fair value of the entire company by $325,000.

A company has the following expenditures during the year.

Advertising $ 100,000

Employee training 80,000

Customer outreach and consultation 50,000

The company believes that these efforts have increased the fair value of the entire company by $325,000. How much goodwill can the company recognize at the end of the year associated with these expenditures?

A) $0.

B) $80,000.

C) $230,000.

D) $325,000.

Answer: A

Which of the following subsequent expenditures would be capitalized?

A) Ordinary repairs and maintenance.

B) Additions.

C) Improvements.

D) Additions and improvements.

Answer: D

Which of the following subsequent expenditures would be capitalized?

A) Ordinary repair.

B) Costs that increase the service life of an asset.

C) Routine maintenance.

D) Ordinary repair and routine maintenance.

Answer: B