Exam 8: Reporting and Analyzing Long-Term Assets

Lima Enterprises purchased a depreciable asset for $22,000 on April 1,Year 1.The asset will be depreciated using the straight-line method over its four-year useful life.Assuming the asset's salvage value is $2,000,Lima Enterprises should recognize depreciation expense in Year 2 in the amount of:

On April 1,Year 1,Astor Corp.purchased and placed a plant asset in service.The following information is available regarding the plant asset: Make the necessary adjusting journal entries at December 31,Year 1,and December 31,Year 2 to record depreciation for each year under the straight-line depreciation method.

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000.The machine is depreciated using the units-of-production method.The company estimates it will use the machine for 5 years,during which time it anticipates producing 40,000 units.The machine is estimated to have a $4,000 salvage value.The company produces 9,000 units in year 1 and 6,000 units in year 2.Depreciation expense in year 2 is:

The formula to compute annual straight-line depreciation is:

Capital expenditures that extend an asset's useful life beyond its original estimate are called ________.

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

The cost of fees for insuring the title and any accrued property taxes are included in the cost of land.

Describe the accounting for natural resources,including their acquisition,cost allocation,and account titles.

A company purchased a special purpose machine on September 15 of the past year,and it was installed and ready to run on January 1 of this year.The following costs were incurred in the purchase and installation of the machine.Determine the total cost of the machine.

Which of the following would be classified as a natural resource?

Edmond reported average total assets of $9,965 million and net sales of $10,430 million.Its total asset turnover equals .96.

Fortune Drilling Company acquires a mineral deposit at a cost of $5,900,000.It incurs additional costs of $600,000 to access the deposit,which is estimated to contain 2,000,000 tons and is expected to take 5 years to extract.What journal entry would be needed to record the expense for the first year assuming 418,000 tons were mined?

Additions to land that increase the usefulness of the land such as parking lots,fences,and lighting are not depreciated.

Financial accounting and tax accounting require the same recordkeeping and there should be no difference in results between the two accounting systems.

Explain the impact,if any,on depreciation when estimates that determine depreciation change.

Gaston owns equipment that cost $90,500 with accumulated depreciation of $61,000.Gaston asks $30,000 for the equipment but 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?

What are some of the variables that make a plant asset's useful life difficult to predict?

Depreciation expense is higher in earlier years and income is higher in the later years when using accelerated versus straight-line methods.

Merchant Company purchased property for a building site.The costs associated with the property were: What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?

A company purchased equipment valued at $66,000.It traded in old equipment for a $9,000 trade-in allowance and the company paid $57,000 cash with the trade-in.The old equipment cost $44,000 and had accumulated depreciation of $36,000.This transaction has commercial substance.What is the recorded value of the new equipment?