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Exam 8: Reporting and Analyzing Long-Term Assets

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Question 61

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On January 1 of the current year,a company purchased a plant asset for $120,000.The asset has an estimated salvage value of $16,000,and an estimated useful life of 8 years.Depreciation expense in the first year using the double-declining-balance method is $30,000.

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Question 62

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The depreciation method that allocates an equal portion of the total depreciable cost for a plant asset to each unit produced is called:

A) Accelerated depreciation.
B) Declining-balance depreciation.
C) Straight-line depreciation.
D) Units-of-production depreciation.
E) Modified accelerated cost recovery system (MACRS) depreciation.

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Question 63

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On January 1,Year 1,Naples purchased a computer system that cost $1,480,000.The estimated useful life of the computer is 3 years and salvage value is $40,000.Straight-line depreciation is to be used.On January 1,Year 2,Naples determined that the estimated useful life of the computer would be 4 years instead of 3 years.The estimated salvage value will only be $10,000. Prepare the journal entry to record depreciation expense for Year 1. Prepare the journal entry to record depreciation expense for Year 2.

Ngu owns equipment that cost $93,500 with accumulated depreciation of $64,000.Ngu asks $35,000 for the equipment but sells the equipment for $33,000.Compute the amount of gain or loss on the sale.

The calculation of total asset turnover is:

The modified accelerated cost recovery system (MACRS) :

The depreciation method that charges a varying amount to expense for each period of an asset's useful life depending on its usage is ________.

Once an asset's book value equals its salvage value,depreciation stops.

Record the following events and transactions for Leonard Company for the current year. 1.On January 2,Leonard purchased a patent for $35,000 with a remaining useful life of 10 years.Prepare the journal entry to amortize the patent at the end of the first year. 2.On January 3,Leonard made an advance payment on a leasehold of $840,000.The leasehold expires in 15 years.Prepare the journal entry to amortize the leasehold at the end of the first year. 3.On January 4,Leonard purchased a music distributor's collection of lyrics and songs for $1,425,000.The copyrights have a remaining life of another 30 years.Prepare the journal entry to amortize the copyright at the end of the first year.

Riverboat Adventures pays $310,000 plus $15,000 in closing costs to buy out a competitor.The real estate consists of land appraised at $35,000,a building appraised at $105,000,and paddleboats appraised at $210,000.Compute the cost that should be allocated to the building.

Martin Company purchases a machine at the beginning of the year at a cost of $60,000.The machine is depreciated using the straight-line method.The machine's useful life is estimated to be 4 years with a $5,000 salvage value.Depreciation expense in year 4 is:

Flask Company reports net sales of $4,315 million; cost of goods sold of $2,808 million; net income of $283 million; and average total assets of $2,136.Compute its total asset turnover.

A company sold equipment that originally cost $100,000 for $60,000 cash.The accumulated depreciation on the equipment was $40,000.The company should recognize a:

Plant assets are defined as:

If an asset is sold above its book value,the selling company records a loss.

Fortune Drilling Company acquires a mineral deposit at a cost of $5,900,000.It incurs additional costs of $600,000 to access the deposit,which is estimated to contain 2,000,000 tons and is expected to take 5 years to extract.Compute the depletion expense for the first year assuming 418,000 tons were mined.

A company discarded a computer system originally purchased for $18,000.The accumulated depreciation was $17,200.The company should recognize a(an) :

When a company constructs a building,the cost of the building includes materials and labor but not design fees,building permits,or insurance during construction.

Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000.The machine's useful life is estimated to be 5 years,or 300,000 units of product,with a $15,000 salvage value.During its first year,the machine produces 64,500 units of product.Determine the machines' first year depreciation under the straight-line method.

Revenue expenditures,also called income statement expenditures,are additional costs of plant assets that do not materially increase the assets' life or productive capabilities.