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Exam 8: Accounting for Long-Term Assets

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Question 101

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Once an asset's book value equals its salvage value,depreciation stops.

A) True
B) False

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Question 102

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Describe the accounting for intangible assets,including their acquisition,cost allocation,and accounts involved.

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Intangible assets are recorded at acquis...

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Question 103

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When the usefulness of plant assets used to extract natural resources is directly related to the depletion of a natural resource,their costs are depreciated using the units-of-production method of depreciation,as long as the assets will not be moved to and used at another site when extraction of the natural resources is complete.

The following information is available on a depreciable asset owned by Mutual Savings Bank: $\begin{array} { | l | l | } \hline \text { Purchase date } & \text { July } 1 , \text { Year } 1 \\\hline \text { Purchase price } & \$ 85,000 \\\hline \text { Salvage value } & \$ 10,000 \\\hline \text { Useful life } & 10 \text { years } \\\hline \text { Depreciation method } & \text { straight-line } \\\hline\end{array}$ The asset's book value is $70,000 on July 1,Year 3.On that date,management determines that the asset's salvage value should be $5,000 rather than the original estimate of $10,000.Based on this information,the amount of depreciation expense the company should recognize during the last six months of Year 3 would be:

The formula to compute annual straight-line depreciation is:

The depreciation method that produces larger depreciation expense during the early years of an asset's life and smaller expense in the later years is a(an) :

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.

During the current year,a company exchanged an old truck costing $58,000 with accumulated depreciation of $52,000 for a new truck.The new truck had a cash price of $80,000 and the company received a $16,000 trade-in allowance on the old truck with the balance of $64,000 paid in cash.Prepare the journal entry to record the exchange,assuming the transaction has commercial substance.

A company had net sales of $230,000 for 2015 and $288,000 for 2016.The company's average total assets for 2015 were $150,000 and $180,000 for 2016.Calculate the total asset turnover for each year and comment on the company's efficiency in the use of its assets.

Martin Company purchases a machine at the beginning of the year at a cost of $60,000.The machine is depreciated using the double-declining-balance method.The machine's useful life is estimated to be 4 years with a $5,000 salvage value. -Depreciation expense in year 4 is:

Total asset cost plus depreciation expense equals book value.

Natural resources are:

A company's old machine that cost $40,000 and had accumulated depreciation of $22,000 was traded in on a new machine having an estimated 20-year life with an invoice price of $45,000.The company also paid $33,000 cash,along with its old machine to acquire the new machine.If this transaction has commercial substance,the new machine should be recorded at:

Match each of the following terms with the appropriate definitions. -A condition where a plant asset is no longer useful in producing goods or services with a competitive advantage.

Extraordinary repairs are expenditures extending the asset's useful life beyond its original estimate,and are capital expenditures because they benefit future periods.

Match each of the following terms with the appropriate definitions. -Alternations or improvements to leased property made by the lessee.

What are the general accounting procedures for recording asset disposals?

Plant assets are defined as:

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: $\begin{array} { l l } \text { Land } & \$ 522,000 \\\text { Building } & 243,000 \\\text { Equipment } & 135,000 \\\text { Total } & \$ 900,000\end{array}$ Prepare Schwartz' journal entry to record the acquisition of these assets.

Explain in detail how to compute each of the following depreciation methods: straight-line,units-of-production,and double-declining-balance.