Exam 9: Reporting and Interpreting Liabilities

Johnson Company acquires land and building for $4,000,000 including all fees related to acquisition. The land is appraised at $2,700,000 and the building at $2,100,000. The building is then renovated at a cost of $750,000. What amount is capitalized to the building account?

The Land account would include all of the following costs except

When Ford Motor Company expenses a $200 tool used in manufacturing, instead of capitalizing its cost as an asset, it does so because of the conservatism convention.

On January 1, 2013, Stacy Company purchased the College Book Store for $350,000. At the date of purchase, it was determined the recorded assets had a total market value of $325,000, comprised of inventory (books), $275,000; fixtures, $30,000; and other assets $20,000. It is estimated that the goodwill (if any) has an economic useful life of 20 years. What is the amount of amortization expense for goodwill for 2013?

The records of Pam Company showed the following about a machine on January 1, 20H: Purchased 1/1/20E for $35,000 Accumulated depreciation at January 1, 20H, $26,400 On July 1, 20H, the machine was sold for $7,000. Depreciation for the first six months of 20H was $1,467. The gain or loss on disposal would be which of the following?

Regardless of the method of depreciation used under international financial reporting standards, the ending book value will be the same at the end of the asset's economic life.

On January 1, 20B, Walton Corporation made a basket purchase of land, a building, and furniture and fixtures. The total purchase price was $313,000. Walton also paid $3,000 for title fees and $4,000 in legal fees related to the purchase. Appraised values at the time of the purchase were: land $70,000; building, $227,500; and furniture and fixtures, $52,500. Required: 1. Make the journal entry to record the purchase of the assets, with cost based on appraised values. 2. The building had an estimated useful life of 20 years and residual value of $30,000. Make the journal entry to record depreciation for 20B using the declining-balance method and a 150% acceleration rate. 3. The furniture and fixtures are expected to have useful lives of 5 years and no residual value. What is the amount of depreciation on the furniture and fixtures for 20B, assuming that Walton uses the straight-line method of depreciation for such assets. 4. Based on the information in part 3, what is the book value of the furniture and fixtures at the end o 20B? 5. Under IFRS, would Walton be able to use the declining-balance method for the building and the straight-line method for furniture and fixtures? Discuss briefly.

On January 1, 2013, Enid Corporation purchased a patent from another company for $190,000. The estimated useful life of the patent is 10 years, and its remaining legal life is 15 years. The Amortization Expense for 2013 is:

Depletion is recorded for which of the following?

In 2013, WD Company reported the cost of its theme parks, resorts, and other assets at $14,037 million and the accumulated depreciation at $5,382 million. In that same year, "Toys 4 U" reported $5,610 million in operating assets and accumulated depreciation on them of $1,398 million. 1. Estimate the approximate remaining life of the assets for WD Company and "Toys 4 U" 2. Which company appears to have newer assets with longer remaining lives?

Rebuild Inc. purchased a plant and the land on which the plant was located for a total of $300,000 cash. The separate market values of the plant and land were not known, so Rebuild hired an independent appraiser who gave the following estimated market values: plant, $220,000; land, $110,000. Complete the entry to record the acquisition (show computation).

The cost principle should be applied in recording the acquisition of natural resources and intangible assets.

The concept of depreciation is best explained by which accounting principle or assumption?

On January 1, 2013, a machine with a useful life of five years and a residual value of $2,500 was purchased for $25,000. Using the double-declining-balance method, the depreciation expense for the year ending December 31, 2014 would be

Carrying amount (or net book value) is always the same as fair value.

To which account should the amount of sales tax paid on the purchase of new machinery be debited?

Helm Corporation purchased a machine with an initial cost of $80,000, a residual value of $5,000, and an estimated useful life of 10 years. At the beginning of the fifth year, Helm spent $10,000 for an extraordinary repair. Following the repair, Helm estimated that the machine had a remaining useful life of 8 years, and that the residual value was unchanged. Calculate depreciation expense on the machine for the fifth year, assuming that Helm uses the straight-line method.

Here are selected 2013 transactions of Avery Corporation. Avery Corporation uses straight-line depreciation. Required: Prepare all entries required on the above dates, including entries to update depreciation on assets disposed of, where applicable.

A company decided to use the units-of-production method to calculate depreciation on a car to be driven by the sales manager. The amount of annual depreciation will vary with which of the following?

Most companies keep separate sets of accounting records for financial reporting and for income tax computations. Which of the following statements is true?