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A.
B.
C.
D.
2.
A.
B.
C.
D.
3. The American Co. spent $2,000 to purchase a long-lived asset, but incorrectly
recorded it as an expense. As a result, its:
A. Net income is overstated.
B. Assets are overstated.
C. Stockholders' equity is understated.
D. Revenues are overstated.
4. ABC Co. purchased a parcel of land for $300,000. It paid attorney fees of
$2,000 to verify title to the land. In addition, it paid a broker's fee of $5,000 to
help find a suitable parcel of land. This parcel of land should be recorded in
the accounting records for:
1. $300,000.
2. $302,000.
3. $305,000.
4. $307,000.
5. XYZ, Inc. purchased $100,000 of equipment, paying cash of $10,000, and
promising to pay the remainder in six months. As a result, its total assets:
A. Are increased by $100,000.
B. Are increased by $90,000.
C. Are decreased by $10,000.
D. Remain the same.
6. XYZ, Inc. purchased $100,000 of equipment, paying cash of $10,000, and
promising to pay the remainder in six months. As a result of acquiring the
equipment, its net income:
A. Increases by $90,000.
B. Decreases by $90,000.
C. Decreases by $10,000.
D. Remains the same.
12. Universal Corp. sold a used piece of machinery for $12,000. At the time of the
sale, its book value was $9,000. As a result of this sale, total assets:
A.
B.
C.
D.
Increase by $12,000.
Decrease by $9,000.
Increase by $3,000.
Decrease by $3,000.