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Exam 8: Accounting for Long-Term Assets

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Question 71

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A machine had an original cost of $60,000.After $45,000 of depreciation was recorded,the machine was traded in on a new machine priced at $75,000.A $10,500 trade-in allowance was received on the old machine and the balance of $64,500 was paid in cash.This transaction has commercial substance.Prepare the general journal entry to record this trade-in.

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Question 72

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Gaston owns equipment that cost $90,500 with accumulated depreciation of $61,000.Gaston sells the equipment for $26,000.Which of the following would not be part of the journal entry to record the disposal of the equipment?

A) Debit Accumulated Depreciation $61,000.
B) Credit Equipment $90,500.
C) Debit Loss on Disposal of Equipment $3,500.
D) Credit Gain on Disposal of Equipment $3,500.
E) Debit Cash $26,000.

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

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Question 73

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Mohr Company purchases a machine at the beginning of the year at a cost of $24,000.The machine is depreciated using the straight-line method. -The machine's useful life is estimated to be 5 years with a $4,000 salvage value.Depreciation expense in year 2 is:

A company exchanged an old automobile for a newer model.The old automobile account had a cost of $36,000 and accumulated depreciation of $25,000 as of the exchange date.The new automobile had a cash price of $34,000,but the company was given a $15,000 trade-in allowance and the balance of $19,000 was paid in cash.Prepare the journal entry to record the exchange,if the transaction has commercial substance.

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

A company used straight-line depreciation for an item of equipment that cost $12,000,had a salvage value of $2,000 and a five-year useful life.After depreciating the asset for three complete years,the salvage value was reduced to $1,200 but its total useful life remained the same.Determine the amount of depreciation to be charged against the equipment during each of the remaining years of its useful life:

A company's property records revealed the following information about one of its plant assets: Calculate the depreciation expense for the asset in Year 1 and Year 2 for the year ended December 31.

A company sold equipment that originally cost $100,000 for $60,000 cash.The accumulated depreciation on the equipment was $40,000.The company should recognize a:

Intangible assets do not include:

A company purchased a weaving machine for $190,000.The machine has a useful life of 8 years and a residual value of $10,000.It is estimated that the machine could produce 75,000 bolts of woven fabric over its useful life.In the first year,15,000 bolts were produced.In the second year,production increased to 19,000 units. -Using the units-of-production method,what is the amount of accumulated depreciation at the end of the second year?

The depreciation method that charges a varying amount to expense for each period of an asset's useful life depending on its usage is ________.

Schwartz Co.paid $780,000 cash to buy the plant assets of Kimberly Co.that went out of business.An independent appraiser assigned the following values to the assets acquired: Prepare Schwartz' journal entry to record the acquisition of these assets.

On April 1 of the current year,a company disposed of a truck that had cost $20,000.The truck had a salvage value of $2,000,and a useful life of 5 years.The accounting records showed accumulated depreciation for this truck of $8,100 as of April 1 of the current year.The asset was discarded after an accident,and $10,500 cash was received from an insurance claim.Prepare the journal entry to record the disposal of the truck.

Total asset turnover is calculated by dividing average total assets by net sales.

Depreciation does not measure the decline in market value of an asset each period.

Intangible assets are nonphysical assets used in operations that give owners' long-term rights or competitive advantages.

Gain or loss on the disposal of assets is determined by comparing the disposed asset's book value to the market value of any assets received.

Plant assets are defined as:

A company had a tractor destroyed by fire.The tractor originally cost $85,000 with accumulated depreciation of $60,000.The proceeds from the insurance company were $20,000.The company should recognize:

A company purchased mining property for $1,560,000.The property was estimated to contain 13,000,000 tons of ore.In the current year,the company removed and sold 263,000 tons of ore.Calculate the depletion expense for the current year.