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Exam 9: Long-Term Assets: Fixed and Intangible

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Question 21

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Classify each of the following costs associated with long-lived assets as one of the following: -Fences around land at new business location A)Land improvements B)Buildings C)Land D)Machinery and equipment

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Question 22

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A characteristic of a fixed asset is that it is

A) intangible
B) used in the operations of a business
C) held for sale in the ordinary course of the business
D) a short-term investment

E) B) and C)
F) A) and D)

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Question 23

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Comment on the validity of the following statements. "As an asset loses its ability to provide services, cash needs to be set aside to replace it. Depreciation accomplishes this goal."

Costs associated with normal research and development activities should be treated as intangible assets.

The process of transferring the cost of metal ores and other minerals removed from the earth to an expense account is called

When old equipment is traded in for a new equipment, the difference between the list price and the trade in allowance is called boot.

Match each account name to the financial statement section (a-i) in which it would appear. -Research and Development Costs A)Current Assets B)Fixed Assets C)Intangible Assets D)Current Liability E)Long-Term Liability F)Owners' Equity G)Revenues H)Operating Expenses I)Other Income/Expense

Which of the following is an example of a capital expenditure?

Match each account name to the financial statement section (a-i) in which it would appear. -Amortization Expense A)Current Assets B)Fixed Assets C)Intangible Assets D)Current Liability E)Long-Term Liability F)Owners' Equity G)Revenues H)Operating Expenses I)Other Income/Expense

Residual value is not incorporated in the initial calculations for double-declining-balance depreciation.

As a company records depreciation expense for a period of time, cash is accumulated to replace fixed assets as they wear out.

Accumulated Depreciation

Capital expenditures are costs that improve a fixed asset or extend its useful life.

The amount of the depreciation expense for the second full year of use of a fixed asset costing $100,000, with an estimated residual value of $5,000 and a useful life of 4 years, is $25,000 by the double-declining-balance method.

The cost of repairing damage to a machine during installation is debited to a fixed asset account.

The cost of new equipment is called a revenue expenditure because it will help generate revenues in the future.

Classify each of the following costs associated with long-lived assets as one of the following: -Cost assessed by city for paving a public street that borders land on which a new business location will be constructed A)Land improvements B)Buildings C)Land D)Machinery and equipment

A fixed asset with a cost of $52,000 and accumulated depreciation of $47,500 is traded for a similar asset priced at $60,000 (fair market value) in a transaction with commercial substance. Assuming a trade-in allowance of $5,000, at what cost will the new equipment be recorded in the books?

On December 31, Strike Company has decided to discard one of its batting cages. The equipment had an initial cost of $310,000 and has accumulated depreciation of $260,000. Depreciation has been recorded up to the end of the year. Which of the following will be included in the entry to record the disposal?

Classify each of the following costs associated with long-lived assets as one of the following: -Interest on money borrowed to finance construction of new office building A)Buildings B)Machinery and equipment C)Land D)Land improvements