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Exam 10: Long -Term Assets

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Question 101

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If net cash flows from operating activities total $115,000,net cash flows from financing activities total $50,000,net cash flows from investing activities total $60,000,purchases of plant assets total $30,000,dividends total $12,000,and sales of plant assets total $17,000,the free cash flow equals

A) $90,000.
B) $174,000.
C) $116,000.
D) $56,000.

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Question 102

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A reduction in carrying value as a result of impairment is recorded as a loss.

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Question 103

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The cost of repairing a machine damaged during installation should be charged as an operating expense.

Asset impairment occurs when the fair value of a long-term asset exceeds its carrying value.

Horshack Mining Company purchases a gravel pit for $5,000,000.It estimates that 10,000,000 tons of gravel can be extracted over the pit's useful life.If 1,860,000 tons are extracted and sold during the first year,the entry to record depletion expense will include

The exclusive right to sell a product within a certain geographic area is called a

Overhauling a company's cooling system is an example of an extraordinary repair.

Boulder Company had net cash flows of $150,000 from operating activities.It extended $60,000 for purchases of plant assets,sold plant assets for $5,000,and paid dividends of $70,000.The company's free cash flow is

A truck is purchased for $70,000.It has a five-year life and a $10,000 residual value.Under the double-declining-balance method,what is the accumulated depreciation after two years?

Which of the following statements is true about successful efforts accounting?

A tractor held by a farm equipment company for sale to farmers is classified as a long-term asset.

A company purchases for $48,000 an asset that has a useful life of six years and no salvage value.After two years,the company spends $8,000 for a major overhaul that will extend the machine's useful life four years beyond the original six.Assuming straight-line depreciation,how much depreciation should be taken in year 3?

Land and a building on the land are purchased for $310,000.The appraised values of the land and building are $66,000 and $264,000,respectively.The cost allocated to the building should be

An asset that cost $24,000 and has accumulated depreciation of $18,000 is sold for $5,200.The entry to record the sale includes

A truck that cost $12,000 and on which $9,000 of accumulated depreciation has been recorded was disposed of on January 1.Assume that the truck was traded for a similar truck having a price of $13,000,that an $1,800 trade-in was allowed,and that the balance was paid in cash.The amount of the gain or loss recognized on this transaction would be

On January 2,2013,Topanga Company purchased a machine for $90,000.The machine has a five-year estimated useful life and a $6,000 estimated residual value.In addition,the company expects to use the machine 200,000 hours.Assuming that the machine was used 35,000 hours during 2014,complete the following chart.If a figure cannot be determined,indicate so by placing an "X" in the box.(Show your work.)

Suppose an accounting intern mistakenly calculated depreciation expense on the Land account.She assigned it a 50-year life and a residual value of $10,000,000.Using the cost of the land (assume it was $811,000,000)and the straight-line method of depreciation,discuss the dollar effect of this error on pretax earnings and total assets.

In general,how does one determine whether or not an expenditure should be included in the acquisition cost of property,plant,and equipment?

When the trade-in allowance exceeds the carrying value of an asset exchanged,a gain is realized.

If an asset costs $41,000,has a residual value of $3,000,and has a useful life of five years,the entry to record depreciation in the second year,using the double-declining-balance method,is