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Exam 8: Reporting and Analyzing Long-Term Assets

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Question 1

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Another name for a capital expenditure is:

A) Revenue expenditure.
B) Asset expenditure.
C) Long-term expenditure.
D) Contributed capital expenditure.
E) Balance sheet expenditure.

F) A) and E)
G) A) and D)

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Question 2

Multiple Choice

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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 land.

A) $93,000.
B) $140,000.
C) $32,500.
D) $31,000.
E) $97,500.

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

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Question 3

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Bering Rock acquires a granite quarry at a cost of $590,000,which is estimated to contain 200,000 tons of granite and is expected to take 6 years to remove.Compute the depletion expense for the first year assuming 38,000 tons were removed and sold.

Martin Company purchases a machine at the beginning of the year at a cost of $60,000.The machine is depreciated using the double-declining-balance method.The machine's useful life is estimated to be 4 years with a $5,000 salvage value.The machine's book value at the end of year 3 is:

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?

An asset can be disposed of by all of the following except:

Total asset turnover is used to evaluate:

An asset's book value is $36,000 on January 1,Year 6.The asset is being depreciated $500 per month using the straight-line method.Assuming the asset is sold on July 1,Year 7 for $25,000,the company should record:

Lima Enterprises purchased a depreciable asset for $22,000 on April 1,Year 1.The asset will be depreciated using the straight-line method over its four-year useful life.Assuming the asset's salvage value is $2,000,what will be the amount of accumulated depreciation on this asset on December 31,Year 3?

Owning a patent:

A machine with an original cost of $120,000 and no salvage value had an estimated useful life of 6 years,but after 4 complete years,it was decided that the original estimate of useful life should have been 8 years.Assuming the company uses straight-line depreciation,the amount of depreciation expense in year 5 is:

The depreciation method that recognizes equal amounts of annual depreciation over the life of an asset is ________.

On September 30 of the current year,a company acquired and placed in service a machine at a cost of $700,000.It has been estimated that the machine has a service life of five years and a salvage value of $40,000.Using the double-declining-balance method of depreciation,complete the schedule below showing depreciation amounts for all six years (round answers to the nearest dollar).The company closes its books on December 31 of each year.

A company purchased a delivery van on October 1 of the current year at a cost of $40,000.The van is expected to last six years and has 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 book value of the van at the end of the first year?

The purchase of a property that included land,building,and related improvements is called a lump-sum or basket purchase.

Land improvements are:

Westport Company reports the following in millions: net sales of $25,300 for 2016 and $22,640 for 2015; end-of-year total assets of $14,875 for 2016 and $13,680 for 2015.Compute its total asset turnover for 2016 and assess its level if competitors average a total asset turnover of 2.0 times.

A trademark is an exclusive right granted to its owner to publish and sell a musical,literary,or artistic work during the life of the creator plus 70 years.

Obsolescence refers to the insufficient capacity of a company's plant assets to meet the company's production demands.

An accelerated depreciation method yields larger depreciation expense in the early years of an asset's life and less depreciation expense in later years.