Machinery

Question 1

The term betterment means

a. An expenditure made for new facilities which increase capacity.
b. An expenditure made to restore capacity.
c. An expenditure made to improve existing facilities by increasing capacity.
d. An expenditure made to help insure continuity of capacity.

Answer 1

c. An expenditure made to improve existing facilities by increasing capacity.

Question 2

Which type of expenditure occurs when an entity installs a higher capacity boiler to heat the plant?

a. Rearrangement
b. Ordinary repair and maintenance
C. Addition
d. Betterment

Answer 2

d. Betterment

Question 3

An improvement made to a machine which increased the fair value and production capacity without extending the useful life of the machine should be

a. Expensed immediately
b. Debited to accumulated depreciation
C. Capitalized in the machine account
d. Allocated between accumulated depreciation and the machine

Answer 3

C. Capitalized in the machine account

Question 4

Which of the following would ordinarily be treated as a revenue expenditure rather than a capital expenditure?

a. Cost of servicing and overhaul to restore or maintain the originally assessed standard of performance.
b. The replacement of a major component of building
c. An addition to an existing building
d. Improvement expected to provide discernible future benefit

Answer 4

a. Cost of servicing and overhaul to restore or maintain the originally assessed standard of performance.

Question 5

The damaged portion of building was refurbished with higher quality materials. The cost of the damaged portion is identifiable. Which statement is correct?

a. Capitalize cost of refurbishing and record loss equal to carrying amount of damaged portion
b. Capitalize cost of refurbishing
C. Record loss equal to the cost of refurbishing
d. No loss is recorded

Answer 5

IDK

Question 6

Which cost should not be capitalized? a.

a. Replacement of roof of building every 15 years
b. Cost of site preparation
c. Installation and assembly cost
d. Replacement of small spare parts annually

Answer 6

d. Replacement of small spare parts annually

Question 7

Which expenditure may properly be capitalized?

a. Expenditure for massive advertising campaign
b. Insurance on plant during construction
c. Research and development related to a long-term asset giving the entity a competitive market advantage
d. Title search and other legal cost related to a piece of property which was not acquired

Answer 7

b. Insurance on plant during construction

Question 8

Which subsequent expenditure should be expensed immediately?

a. Expenditure made to increase the efficiency or effectiveness of an existing asset
b. Expenditure made to extend useful life of an existing asset
c. Expenditure made to maintain an existing asset in operating condition
d. Expenditure made to add new asset

Answer 8

c. Expenditure made to maintain an existing asset in operating condition

Question 9

An expenditure made in connection with a machine being used by an entity should be

a. Expensed if it merely extends the useful life but does not improve the quality.
b. Expensed if it merely improves the quality but does not extend the useful life.
c. Capitalized if it maintains the machine in normal operating condition
d. Capitalized if it increases the quantity of units produced by the machine.

Answer 9

d. Capitalized if it increases the quantity of units produced by the machine.

Question 10

An entity incurred cost to modify a building and to improve a production line resulting to overall reduction in production cost. Which cost should be capitalized?

a. Building modification cost
b. Improvement of production line
c. Both building modification cost and improvement of production line
d. Neither

Answer 10

c. Both building modification cost and improvement of production line