Exam 9: Reporting and Interpreting Liabilities

Kovacic Company purchased a computer that cost $10,000. It had an estimated useful life of five years and residual value of $0. The computer was depreciated by the straight-line method and was sold at the end of the fourth year of use for $3,000 cash. What should Kovacic record?

Recording depreciation expense does which of the following?

Intangible assets

The amortization of finite life intangibles is recorded as:

On January 1, 20A, Stern Company (a calendar year corporation) purchased a heavy duty machine having an invoice price of $13,000 plus transportation and installation costs of $3,000. The machine is estimated to have a 4-year useful life and a $1,000 residual value. Assuming the company uses the declining-balance method depreciation and a 150% acceleration rate, complete the following schedule (round to the nearest dollar).

On September 7, 20B, Belverd Corporation purchased a building and land at a total acquisition cost of $500,000. An appraiser estimated that 80% of the purchase price should be assigned to the buildin and the remainder to the land. Required: 1. Make the journal entry for the acquisition of the land and building. 2. Make the journal entry to record depreciation of the building for 20B. Belverd takes a full month o depreciation for assets acquired in the first half of the month and uses the straight-line method. The building has a residual value of $40,000 and an estimated useful life of 20 years. 3. Based on the information in part 2, what will the book value of the building be at the end of 20C? 4. Why was it important for Belverd to separate the cost of the land and the cost of the building?

When an entire business is purchased, goodwill is the excess of cost over the carrying amount of the net identifiable assets acquired.

An asset being amortized with the straight-line method has a residual value of $20,000 and amortization expense of $25,000 in its second year. What was the original cost of the asset if its useful life was 10 years?

Chamber Company purchased a truck on January 1, 20A, at a cash cost of $10,600. The estimated residual value was $400 and the estimated useful life 4 years. The company uses straight-line depreciation computed monthly. On July 1, 20D, the company sold the truck for $1,700 cash. A. What was the depreciation expense amount per month? B. What was the amount of accumulated depreciation at July 1, 20D? C. Give the required journal entries on the date of disposal, July 1, 20D. (Assume no 20D depreciation had yet been recorded).

Depreciation expense and impairment losses are presented in the operating section of the income statement.

The apportionment of the acquisition cost of an operational asset to future periods in which the benefits contribute to earning revenue must be which of the following?

The cost of a patent should be amortized over the shorter of its economic life and its remaining legal life.

No clear line distinguishes capital expenditures (assets) from revenue expenditures (expenses); therefore, it requires managers to exercise judgment in making a subjective decision.

A company purchases a remote site building for computer operations. The building will be suitable for operations after some expenditures. The wiring must be replaced to computer specifications. The roof is leaky and must be replaced. All rooms must be repainted and recarpeted and there will also be some plumbing work done. Which of the following statements is true?

Belmont Corporation made a basket purchase of land, a building and equipment, paying a total of $1,500,000. Market values for the assets were not available, but the appraised values were $300,000 for the land, $900,000 for the building, and $600,000 for equipment. What amounts should be recorded in the Land, Building, and Equipment accounts, respectively?

The cash flows from the purchase and sale of long-lived assets are reported in the operating activities section of the cash flow statement.

Natural resources should be depleted (usually by the units-of-production method) usually with the amount of the depletion expense capitalized to a revenue account.

The estimate of residual value made at the beginning of the useful life has no relationship to the book value at the end of the asset's useful life.

Which of the following statements is false?

Amortization expense is a result of the expense recognition principle.