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Name ________________________ POINTS POINTS PROBLEM POSSIBLE RECEIVED 1 5 2 15 3 50 4 30 TOTAL 100 Problem #1 (1 points each) Circle the correct answer. 1. Which of the following is not a plant asset? a. land b. furniture c. buildings d. supplies 2. Accumulated depreciation is classified as a(n) a. expense account. b. liability account. c. asset account. d. contra-asset account. 3. Book value is defined as a. depreciation expense plus accumulated depreciation. b. the cost of a plant asset less depreciation expense. c. the cost of a plant asset plus accumulated depreciation. d. the cost of a plant asset less accumulated depreciation. 4. Which statement below is false regarding the double-declining balance method of depreciation? a. Residual value is ignored entirely using the double-declining balance method. b. Many companies switch from the double-declining balance method to the straight-line method during the next-to-last year of the asset’s life c. The double-declining balance method uses a rate that is twice the straight-line rate. d. Final-year depreciation is the amount needed to bring the asset to its estimated residual value. 5. Interest expense should be recorded in the period: a. that the expense is incurred b. a note payable is recorded c. when the note is paid d. on the date that the note is issued Problem 2 Show All Calculations (15 Points) On July 1, Obi Wan Company pays $500,000 for a piece of real estate that contains Land, Building, and Equipment. The fair value of the Land is $200,000, the fair value of the Building is $250,000, and the fair value of the equipment is $150,000. Directions: Prepare the journal entry for Obi Wan to allocate the total cost of the purchase among the assets. Include an explanation. Land 200,000 200,000/600,000 =…
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