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Exam 10: Plant Assets, Natural Resources, and Intangibles

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Question 21

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Marks Consulting purchased equipment costing $45,000 on January 1,Year 1.The equipment is estimated to have a salvage value of $5,000 and an estimated useful life of 8 years.Straight-line depreciation is used.If the equipment is sold on July 1,Year 5 for $20,000,the journal entry to record the sale will include a:

A) Credit to cash for $20,000.
B) Debit to accumulated depreciation for $22,500.
C) Debit to loss on sale for $10,000.
D) Credit to loss on sale for $10,000.
E) Debit to gain on sale for $2,500.

F) C) and D)
G) A) and B)

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Question 22

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A company purchased a weaving machine for $190,000.The machine has a useful life of 8 years and a residual value of $10,000.It is estimated that the machine could produce 75,000 bolts of woven fabric over its useful life.In the first year,15,000 bolts were produced.In the second year,production increased to 19,000 units.Using the units-of-production method,what is the book value of the machine at the end of the second year?

A) $108,400.
B) $144,400.
C) $81,600.
D) $190,000.
E) $180,000.

F) A) and D)
G) B) and C)

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Question 23

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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 units-of-production method.

The following information is available on a depreciable asset owned by Mutual Savings Bank: The asset's book value is $70,000 on June 1,Year 3.On that date,management determines that the asset's salvage value should be $5,000 rather than the original estimate of $10,000.Based on this information,the amount of depreciation expense the company should recognize during the last six months of Year 3 would be:

A ____________________________ results from revising estimates of the useful life or salvage value of a plant asset.

On April 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,12,000 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

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.

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?

Cliff Company traded in an old truck for a new one.The old truck had a cost of $75,000 and accumulated depreciation of $60,000.The new truck had an invoice price of $125,000.Huffington was given a $12,000 trade-in allowance on the old truck,which meant they paid $113,000 in addition to the old truck to acquire the new truck.If this transaction has commercial substance,what is the recorded value of the new truck?

On January 2,2010,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 depreciation expense and the disposition of the truck on September 1,2014,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.This transaction has commercial substance. b.The truck and $40,000 cash were exchanged for a new delivery truck that had a cash price of $60,000.This transaction lacks commercial substance.

A company exchanged an old automobile for a newer model.The old automobile account had a cost of $36,000 and accumulated depreciation of $25,000 as of the exchange date.The new automobile had a cash price of $34,000,but the company was given a $15,000 trade-in allowance and the balance of $19,000 was paid in cash.Prepare the journal entry to record the exchange,if the transaction lacks commercial substance.

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.

Anderson Company sold a piece of equipment for $28,000 cash on December 31 after recording the annual depreciation on the asset.The equipment had an original cost of $97,500 and accumulated depreciation of $63,000.Prepare the general journal entry to record the sale of this asset.

A building was purchased for $370,000 and depreciated for ten years on a straight-line basis under the assumption it would have a twenty-year life and a $10,000 salvage value.At the beginning of the building's eleventh year it was recognized the building had eight years of remaining life instead of ten and that at the end of the remaining eight years its salvage value would be $16,000.What amount of depreciation should be recorded in each of the building's remaining eight years?

Phoenix Agency leases office space for $7,000 per month.On January 3,Phoenix incurs $65,000 to improve the leased office space.These improvements are expected to yield benefits for 8 years.Phoenix has 5 years remaining on its lease.Compute the amount of expense that should be recorded the first year related to the improvements.

Victory Company purchases office equipment at the beginning of the year at a cost of $15,000.The machine's useful life is estimated to be 7 years with a $1,000 salvage value.The book value at the end of 7 years is:

Revenue expenditures to keep an asset in normal,good operating condition;they are necessary if an asset is to perform to expectations over its useful life are called _____________________.

Total asset turnover is used to evaluate:

Schwartz Co.paid $780,000 cash to buy the plant assets of Kimberly Co.that went out of business.An independent appraiser assigned the following values to the assets acquired: Prepare Schwartz' journal entry to record the acquisition of these assets.

Revenue expenditures: