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Exam 9: Fixed Assets and Intangible Assets

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Question 21

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Which of the following statements is true?

A) The fixed asset ratio is not useful for comparing different companies.
B) A smaller fixed asset turnover ratio is associated with firms that are more labor intensive and require smaller fixed asset investments.
C) The fixed asset ratio cannot be compared across time for an individual company.
D) A larger fixed asset turnover ratio is associated with firms that are more labor intensive and require smaller fixed asset investments.

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

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Question 22

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When a company exchanges machinery and receives a trade-in allowance less than the book value,this transaction would be recorded with which of the following entry?

A) debit Cash and Machinery; credit Accumulated Depreciation and Machinery
B) debit Machinery,Accumulated Depreciation,and Loss on Exchange of Machinery; credit Machinery and Cash
C) debit Cash and Machinery; credit Accumulated Depreciation
D) debit Machinery and Accumulated Depreciation; credit Machinery and Cash

E) B) and C)
F) None of the above

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Question 23

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On December 31,Strike Company sold one of its batting cages for $20,000.The equipment had an initial cost of $310,000 and had accumulated depreciation of $260,000.Depreciation has been recorded up to the end of the year.What is the amount of the gain or loss on this transaction?

Machinery is purchased on July 1 of the current fiscal year for $240,000.It is expected to have a useful life of 4 years,or 25,000 operating hours,and a residual value of $15,000.Compute the depreciation for the last six months of the current fiscal year ending December 31 by each of the following methods: a straight-line b double-declining-balance c units-of-output used for 1,600 hours during the current year

On December 31,Strike Company traded-in one of its batting cages for another one that has a cost of $500,000.Strike receives a trade-in allowance of $11,000.The old equipment had an initial cost of $215,000 and has accumulated depreciation of $185,000.Depreciation has been recorded up to the end of the year.The difference will be paid in cash.What is the amount of the gain or loss on this transaction?

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?

Financial statement data for the years ended December 31 for Parker Corporation are as follows: $\begin{array}{lrr} & \text { Current Year } & \text { Prior Year } \\\text { Sales } & \$ 2,595,600 & \$ 2,409,498 \\\text { Fixed assets net: } & & \\\text { Beginning of the year } & \$ 901,070 & \$ 820,000 \\\text { End of the year } & 829,330 & 901,070\end{array}$ a. Determine the fixed asset turnover for the current and prior years. b. Does the change in fixed asset turnover from the prior year to the current year indicate a favorable or unfavorable trend?

The entry to record the disposal of fixed assets will include a credit to accumulated depreciation.

Minerals removed from the earth are classified as intangible assets.

The normal balance of the accumulated depreciation account is a debit.

The natural resources of some companies include

Falcon Company acquired an adjacent lot to construct a new warehouse,paying $40,000 and giving a short-term note for $410,000.Legal fees paid were $13,275,delinquent taxes assessed were $14,500,and fees paid to remove an old building from the land were $15,800.Materials salvaged from the demolition of the building were sold for $6,800.A contractor was paid $890,000 to construct the new warehouse.Determine the cost of the land to be reported on the balance sheet and show your work.

When exchanging equipment,if the trade-in allowance is greater than the book value a loss results.

A fixed asset with a cost of $30,000 and accumulated depreciation of $28,500 is sold for $3,500.What is the amount of the gain or loss on disposal of the fixed asset?

If a fixed asset with a book value of $10,000 is traded for a similar fixed asset,a trade-in allowance of $15,000 is granted by the seller,and the transaction is deemed to have commercial substance,the buyer would report a gain on exchange of fixed assets of $5,000.

An estimate of the amount for which an asset can be sold at the end of its useful life is called residual value.

The double-declining balance rate for calculating depreciation expense is determined by doubling the straight-line rate.Assuming that an asset has a useful life of 25 years,determine the rate to be used if using the double- declining-balance method.

An asset was purchased for $58,000 and originally estimated to have a useful life of 10 years with a residual value of $3,000.After two years of straight-line depreciation,it was determined that the remaining useful life of the asset was only 2 years with a residual value of $2,000. a Determine the amount of the annual depreciation for the first two years. b Determine the book value at the end of Year 2. c Determine the depreciation expense for each of the remaining years after revision.

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.

On June 1,Aaron Company purchased equipment at a cost of $120,000 that has a depreciable cost of $90,000 and an estimated useful life of 3 years and 30,000 hours. Using straight-line depreciation,calculate depreciation expense for the final partial year of service.