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Exam 18: Property, Plant, and Equipment

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Question 41

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The normal balance of Accumulated Depreciation is a(n)----------- .

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Question 42

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A company uses the units-of-output method of computing depreciation on its fleet of cars. A car that costs $65,000 is expected to have a useful life of 120,000 miles and an expected salvage value of $2,600. The rate for each mile is------------ .

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Question 43

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Gains and losses on the disposal of long term assets are considered routine operating activities.

A firm purchases an asset for $60,000 and estimates that it will have a useful life of five years and a salvage value of $5,000. Under the straight-line method, the balance in the accumulated depreciation account, after the second year, will be:

The entry to record the sale of equipment used in a business may include a debit to:

An example of real property is:

The acquisition cost of an intangible asset is amortized over its legal life or----------- life, whichever is shorter.

DJG Corporation purchased land in order to build new corporate headquarters for a purchase price of $758,000. The lawyers charged $2,500 to handle the legal aspects of the purchase. Closing costs paid by DJG amounted to $15,160. There was an old factory and warehouse on the property that cost DJG $7,500 to have removed. In addition, CSB Construction charged the corporation $1,800 to grade the property to ensure proper drainage and an additional $15,800 build a drive, parking lot, and walkways. What amount should be recorded as Land? What other account(s)should be increased and for what amount(s)?

Each year an intangible asset's value is assessed which is then compared to the existing book value in order to determine if impairment of the asset's value must be recorded.

An asset that cost $25,000 was sold for $8,000 cash. Accumulated depreciation on the asset was $16,000. The entry to record this transaction includes the recognition of:

Accumulated Depreciation is classified as an expense on the income statement.

Using the information shown, calculate the depreciation for 2019, 2020, and 2021 if ARB Company uses the straight-line method. Complete the journal entry for the depreciation expense for 2019.

ASB Ceramics purchased equipment used in the business three years ago for $32,000. The accumulated depreciation account related to the equipment asset account had a balance of $15,000. The equipment had an estimated salvage (residual)value of $2,000 and had an estimated life of six years. A full year's depreciation was taken the first year. ASB uses the straight-line depreciation method. All depreciation is usually recorded at year-end. The company sold the equipment in exchange for a promissory note on July 1 of the fourth year for $13,000. Record the appropriate entries necessary.

On January 2, 2019, the Unit Manufacturing Company purchased manufacturing equipment for $62,000. The equipment is expected to have a useful life of six years and a salvage value of $2,000. Prepare a schedule showing the annual depreciation for each of the first three years of the asset's life under the straight-line method, the double-declining-balance method, and the sum-of-the-years'-digits method.

If an asset is purchased at the beginning of a year, the method of depreciation that results in the same amount of depreciation expense each year is the:

The book value of an asset is usually the same as the fair market value of the asset.

Dom's Delivery purchased a van for $32,000. The transportation charges were $400, sales tax was $2,240, and the license cost $250. Special shelving was installed in the van for $4,300. In addition, Dom had the company name painted on the doors at a cost of $1,250. The total cost of the van to record in the proper asset account is:

Use of the sum-of-the-years'-digits method of depreciation results in higher depreciation charges in the early years of an asset's life and lower charges in the later years.

When the units-of-output method is used to compute depreciation, the useful life of an asset is the total estimated number of units of output the asset will perform.

Which of the following is true regarding recording the trade in of one asset for a similar asset for financial reporting purposes?