Exam 8: Reporting and Analyzing Long-Term Assets

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:

Revenue expenditures,also called income statement expenditures,are additional costs of plant assets that do not materially increase the assets' life or productive capabilities.

If an asset is sold above its book value,the selling company records a loss.

Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000.The machine's useful life is estimated to be 5 years,or 300,000 units of product,with a $15,000 salvage value.During its first year,the machine produces 64,500 units of product.Determine the machines' first year depreciation under the straight-line method.

Ngu owns equipment that cost $93,500 with accumulated depreciation of $64,000.Ngu asks $35,000 for the equipment but sells the equipment for $33,000.Compute the amount of gain or loss on the sale.

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

The calculation of total asset turnover is:

On January 1,Year 1,Naples purchased a computer system that cost $1,480,000.The estimated useful life of the computer is 3 years and salvage value is $40,000.Straight-line depreciation is to be used.On January 1,Year 2,Naples determined that the estimated useful life of the computer would be 4 years instead of 3 years.The estimated salvage value will only be $10,000. Prepare the journal entry to record depreciation expense for Year 1. Prepare the journal entry to record depreciation expense for Year 2.

Plant assets are defined as:

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

On January 1 of the current year,a company purchased a plant asset for $120,000.The asset has an estimated salvage value of $16,000,and an estimated useful life of 8 years.Depreciation expense in the first year using the double-declining-balance method is $30,000.

When a company constructs a building,the cost of the building includes materials and labor but not design fees,building permits,or insurance during construction.

Record the following events and transactions for Leonard Company for the current year. 1.On January 2,Leonard purchased a patent for $35,000 with a remaining useful life of 10 years.Prepare the journal entry to amortize the patent at the end of the first year. 2.On January 3,Leonard made an advance payment on a leasehold of $840,000.The leasehold expires in 15 years.Prepare the journal entry to amortize the leasehold at the end of the first year. 3.On January 4,Leonard purchased a music distributor's collection of lyrics and songs for $1,425,000.The copyrights have a remaining life of another 30 years.Prepare the journal entry to amortize the copyright at the end of the first year.

Riverboat Adventures pays $310,000 plus $15,000 in closing costs to buy out a competitor.The real estate consists of land appraised at $35,000,a building appraised at $105,000,and paddleboats appraised at $210,000.Compute the cost that should be allocated to the building.

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.Depreciation expense in year 4 is:

The modified accelerated cost recovery system (MACRS):

The depreciation method that allocates an equal portion of the total depreciable cost for a plant asset to each unit produced is called:

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.Compute the depletion expense for the first year assuming 418,000 tons were mined.

A company discarded a computer system originally purchased for $18,000.The accumulated depreciation was $17,200.The company should recognize a(an):

Flask Company reports net sales of $4,315 million; cost of goods sold of $2,808 million; net income of $283 million; and average total assets of $2,136.Compute its total asset turnover.