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Exam 6: Accounting for Long-Term Operational Assets

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Scott Company purchased a new machine on January 1, Year 1, at a cost of $220,000. The machine is expected to have an eight-year life and a $20,000 salvage value. The machine is expected to produce 800,000 finished products during its eight-year life. Production during Year 1 was 70,000 units and during Year 2 was 110,000 units. Required: Determine the amount of depreciation expense to be recorded on the machine for the years Year 1 and Year 2 under each of the following methods:Straight-lineUnits-of-productionDouble-declining-balance

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Title search and document costs incurred to purchase a building are expensed in the period the building is acquired.

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Question 3

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On January 1, Year 1, the City Taxi Company purchased a new taxi cab for $36,000. The cab has an expected salvage value of $2,000. The company estimates that the cab will be driven 200,000 miles over its life. It uses the units-of-production method to determine depreciation expense. The cab was driven 45,000 miles the first year and 48,000 the second year. What would be the depreciation expense reported on the Year 2 income statement and the book value of the taxi, respectively, at the end of Year 2?

Indicate how each event affects the horizontal financial statements model. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts.Increase = IDecrease = DNot Affected = NAThe Baltimore Company acquired the Chesapeake Company for $650,000 cash. Chesapeake's assets had been appraised at $660,000. At the time of sale Chesapeake's accounting records showed total assets of $590,000, liabilities of $180,000 and stockholders' equity of $410,000. How would the purchase affect Baltimore's financial statements?

Laramie Company paid $1,000,000 for a purchase that included land, building, and office furniture. An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Land, $176,000, Building, $682,000, and Office Furniture, $242,000. Based on this information the cost that would be allocated to the land is: (Do not round intermediate calculations.)

When depreciation is recorded on equipment, Depreciation Expense is increased and Equipment is decreased.

A trademark is a tangible asset with an indefinite useful life.

Intangible assets include patents, copyrights, and franchises.

Which method of depreciation generally allocates the largest amount of depreciation to the first year of the asset's life?

On January 1, Year 1, Missouri Company purchased a truck that cost $57,000. The truck had an expected useful life of 10 years and a $6,000 salvage value. The amount of depreciation expense recognized in Year 2 assuming that Missouri uses the double declining-balance method is:

Which of the following would most likely not be expensed using the straight-line method?

For what types of assets is the recognition of expense called "amortization?"

What is meant by a "basket purchase," and what method is normally used to determine the cost of individual assets?

Which of the following should be the main determinant for selection of the allocation method for long-term operational assets?

Jing Company was started on January 1, Year 1 when it issued common stock for $33,000 cash. Also, on January 1, Year 1 the company purchased office equipment that cost $15,700 cash. The equipment was delivered under terms FOB shipping point, and transportation cost was $1,800. The equipment had a five-year useful life and a $6,200 expected salvage value.Using double-declining-balance depreciation, what the amount of depreciation expense and the amount of accumulated depreciation, respectively, that would appear on the December 31, Year 3 financial statements?

Give an example of an intangible asset with an identifiable useful life.

An expenditure that improves the quality of service provided by a plant asset is added to the historical cost of the asset.

On April 1, Year 1, Fossil Energy Company purchased an oil-producing well at a cash cost of $12,000,000. It is estimated that the oil well contains 600,000 barrels of oil, of which only 500,000 can be profitably extracted. By December 31, Year 1, 25,000 barrels of oil were produced and sold. The amount of depletion for Year 1 on this well would be:

Explain the meaning of the terms "tangible assets" and "intangible assets."

At the end of the current accounting period, Ringgold Company recorded depreciation of $15,000 on its equipment. The effect of this entry on the company's balance sheet is to decrease: