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Exam 8: Reporting and Analyzing Long-Term Assets

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Question 111

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A leasehold is:

A) A short-term rental agreement.
B) The same as a patent.
C) The rights granted to the lessee by the lessor of a lease.
D) Recorded as revenue expenditure when paid.
E) An asset held as an investment.

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

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Question 112

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During the current year,a company exchanged an old truck costing $58,000 with accumulated depreciation of $52,000 for a new truck.The new truck had a cash price of $80,000 and the company received a $16,000 trade-in allowance on the old truck with the balance of $64,000 paid in cash.Prepare the journal entry to record the exchange,assuming the transaction has commercial substance.

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Question 113

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Explain the purpose of and method of depreciation for partial years.

A company paid $150,000,plus a 7% commission and $5,000 in closing costs for a property.The property included land appraised at $87,500,land improvements appraised at $35,000,and a building appraised at $52,500.What should be the allocation of this property's costs in the company's accounting records?

A company purchased a plant asset for $60,000.The asset has an estimated salvage value of $4,000,and an estimated useful life of 7 years.The annual depreciation expense using the straight-line method is $4,000 per year.

A loss on disposal of a plant asset occurs if the cash proceeds received from the asset sale is less than the asset's book value.

The total cost of an asset less its accumulated depreciation is called:

A change in an accounting estimate is:

A machine costing $75,000 is purchased on September 1,Year 1.The machine is estimated to have a salvage value of $10,000 and an estimated useful life of 4 years.Double-declining-balance depreciation is used.If the machine is sold on December 31,Year 3 for $13,000,the journal entry to record the sale will include:

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 company purchased a machine on January 1 of the current year for $750,000.Calculate the annual depreciation expense for each year of the machine's life (estimated at 5 years or 20,000 hours,with a salvage value of $75,000)using each of the below-mentioned methods.During the machine's 5-year life its hourly usage was: 3,000; 4,000; 5,000; 5,000; and 3,000 hours.

If a machine is damaged during unpacking,the repairs are added to its cost.

Marlow Company purchased a point of sale system on January 1 for $3,400.This system has a useful life of 10 years and a salvage value of $400.What would be the accumulated depreciation at the end of the second year of its useful life using the double-declining-balance method?

A company paid $595,000 for property that included land appraised at $384,000; land improvements appraised at $128,000; and a building appraised at $288,000.The plan is to use the building as a manufacturing plant.Determine the amounts that should be recorded as: (a)Land………………….$________ (b)Land Improvements....$________ (c)Building……………… $________

The process of allocating the cost of a plant asset to expense in the accounting periods benefiting from its use is called depletion.

The straight-line depreciation method yields a steady pattern of depreciation expense.

Depreciation does not measure the decline in market value of an asset each period.

To capitalize an expenditure is to:

Salvage value is an estimate of an asset's value at the end of its benefit period.

Identify the balance sheet classification of each of the following assets by placing an X in the correct classification: Plant Assets,Natural Resources,or Intangibles.