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Exam 8: Long-Term Assets

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Question 51

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A company purchased equipment on July 3 of the current year and placed it in service on August 1.The following costs were incurred in acquiring the equipment.Determine the amount to be recorded as cost for the equipment. $\begin{array}{|l|r|}\hline \text { Purchase (invoice) price } & \$ 215,600 \\\hline \text { Transportation } & 1,400 \\\hline \text { Insurance during shipping } & 200 \\\hline \text { One-year fire insurance beginning August 1 of the current year } & 1,200 \\\hline \text { Installation cost } & 4,500 \\\hline \text { Raw materials and direct labor used to test the equipment } & 1,500\\\hline\end{array}$

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Question 52

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Assume BizChair.com sold a used conveyor belt for $172,000 cash.If accumulated depreciation on the sale date was $58,311 and a gain of $6,721 was recognized on the sale,what was the original cost of the asset?

A) $223,590
B) $216,869
C) $165,279
D) $65,032
E) $113,689

F) B) and E)
G) C) and E)

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Question 53

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Describe the accounting for intangible assets,including their acquisition,cost allocation,and accounts involved.

A copyright gives its owner the exclusive right to publish and sell a musical,literary,or artistic work during the life of the creator plus 17 years.

A machine was purchased for $37,000 and depreciated for five years on a straight-line basis under the assumption it would have a ten-year life and a $1,000 salvage value.At the beginning of the machine's sixth year it was recognized the machine had three years of remaining life instead of five and that at the end of the remaining three years its salvage value would be $1,600.What amount of depreciation should be recorded in each of the machine's remaining three years?

_______________________ depreciation recognizes equal amounts of annual depreciation over the life of an asset.

On January 1,a company purchased a machine for $75,000 that had a six-year useful life and a salvage value of $6,000.After three years of straight-line depreciation,on January 1,2013,the company paid $7,500 cash to improve the efficiency of the machine.The effect of the expenditure was to increase the productivity of the machine without increasing its remaining useful life or changing its salvage value.Straight-line depreciation is used throughout the machine's life. a.Prepare the journal entry to record the $7,500 expenditure. b.What amount of depreciation expense should be recorded for 2013?

Ace Company purchased a machine valued at $320,000 on August 1.The equipment has an estimated useful life of five years or 2.5 million units.The equipment is estimated to have a salvage value of $8,200.Assuming the straight-line method of depreciation,what is the amount of depreciation expense that needs to be recorded at the end of the first year?

A machine originally had an estimated useful life of 5 years,but after 3 complete years it was decided that the original estimate of useful life should have been 10 years.At that point the remaining cost to be depreciated should be allocated over the remaining:

Since goodwill is intangible,it is amortized each year using the straight-line method,the same as other intangibles are amortized.

A company had net sales of $789,765 and average assets of $658,137.Calculate the company's total asset turnover.

Smitty Museum purchased the copyright to a piece of artwork for $922,000.Smitty plans to reproduce 1.8 million posters of the artwork over a period of 12 years.Calculate the amortization for the year assuming the Museum plans to reproduce and sell 130,000 posters the first year.

A depreciation method that produces larger depreciation expense during the early years of an asset's life and smaller expense in the later years is a(n) :

Prepare journal entries to record the following transactions of a company during the current year: $\begin{array}{|l|l|}\hline\text { Mar. 1 } & \begin{array}{l}\text { Purchased a truck for } \$ 30,000 \text { with a five-year useful life and a } \$ 5,000 \text { salvage } \\\text { value. Also paid } 6 \% \text { sales tax, } \$ 350 \text { for the annual truck license, } \$ 500 \text { to paint the } \\\text { truck with the company's colors and name, and } \$ 1,500 \text { for spare parts. All } \\\text { payments were in cash. }\end{array} \\\hline \text { May 10 } & \begin{array}{l}\text { Purchased a garage from a neighboring business with a } 7 \% \text {, four-year, } \$ 75,000 \\\text { note. The seller's book value for the garage was } \$ 42,750 \text {. The estimated remaining } \\\text { useful life of the garage is } 10 \text { years. }\end{array} \\\hline \text { June 1 } & \text { Paid } \$ 1,000 \text { cash to replace (uninsured) garage windows broken during a storm. } \\\hline \text { Aug. 25 } & \begin{array}{l}\text { Purchased used office equipment for } \$ 14,700 \text { cash. Sales tax was } \$ 825 \text {, freight } \\\text { costs } \$ 250 \text {, and reconditioning costs } \$ 900 \text {, all of which were paid in cash. The } \\\text { estimated useful life of the equipment is } 3 \text { years and salvage value is } \$ 500 .\end{array} \\\hline \text { Oct. 5 } & \begin{array}{l}\text { Purchased store equipment for } \$ 24,500 \text { cash. Paid } \$ 1,470 \text { in sales tax, } \$ 550 \text { for } \\\text { repairs incurred from an accident during installation, } \$ 3,200 \text { for a special base to } \\\text { house the equipment, and } \$ 2,600 \text { for supplies to be used during periodic preventive } \\\text { maintenance. The estimated useful life of the equipment is eight years and salvage } \\\text { value is } \$ 1,200 .\end{array}\\\hline\end{array}$

Describe the accounting for natural resources,including their acquisition,cost allocation,and account titles.

On July 1 of the current year,a company purchased and placed in service a machine with a cost of $240,000.The company estimated the machine's useful life to be four years or 60,000 units of output with an estimated salvage value of $60,000.During the current year,15,000 units were produced. Prepare the necessary December 31 adjusting journal entry to record depreciation for the current year assuming the company uses: a.The straight-line method of depreciation. b.The units-of-production method of depreciation. c.The double-declining balance method of depreciation.

On January 2,2009,a company purchased a delivery truck for $45,000 cash.The truck had an estimated useful life of seven years and an estimated salvage value of $3,000.The straight-line method of depreciation was used.Prepare the journal entries to record the updating of depreciation and the disposition of the truck on September 1,2013,under each of the following assumptions: a.The truck and $45,000 cash were given in exchange for a new delivery truck that had a cash price of $60,000. b.The truck and $40,000 cash were exchanged for a new delivery truck that had a cash price of $60,000.

How is the cost principle applied to plant asset acquisitions,including lump-sum purchases?

Explain (in detail)how to compute each of the following depreciation methods: straight-line,units-of-production,and double-declining-balance.

A company purchased a truck on October 1 of the current year at a cost of $40,000.The truck is expected to last six years and have a salvage value of $2,200.The company's annual accounting period ends on December 31. 1.What is the depreciation expense for the current year,assuming the straight-line method is used? 2.What is the depreciation expense for the current year,assuming the double-declining-balance method is used?