Exam 9: Reporting and Interpreting Liabilities

Which of the following costs would be excluded from the acquisition cost of equipment purchased from a supplier?

Under what conditions would a company most likely adopt the double-declining-balance method for financial reporting?

When an asset is retired, a gain or loss must be recorded.

Research costs are an example of intangible assets.

Intangible assets include which of the following?

If an acquired franchise or licence is for an indefinite time period, then the cost of the asset should not be amortized.

An item of property, plant, and equipment is considered to be impaired if its carrying amount exceeds its recoverable amount.

What are operational assets that have physical substance called?

An impairment loss is credited to accumulated depreciation.

The book value of an operational asset initially declines less rapidly under the straight-line method than under the declining-balance method.

Tangible assets include which of the following?

Give the required adjusting entry at December 31, 20F, the end of the annual accounting period for the three items below. If no entry is required, explain why. A. Web Company acquired a patent that cost $4,260 on January 1, 20F. The patent was registered on January 1, 20A. The legal life of a patent is 17 years from registration. Web expects to use the patent the remaining legal life. B. Web Company acquired a gravel pit on January 1, 20F, that cost $24,000. The company estimates that 30,000 tons of gravel can be extracted economically. During 20F 4,000 tons were extracted and sold. C. On January 1, 20F, Web Company acquired a dump truck that cost $6,000 to use hauling gravel. The company estimated a residual value of 10% of cost and a useful life 4 years. The company uses straight-line depreciation.

All of the following statements are true, except:

Fraser Ltd. has decided to change the estimate of the useful life of an asset that has been in service for two years. Which of the following statements describes the proper way to revise a useful life estimate?

If an accountant calculates depreciation expense on an asset without taking into account the asset's residual value of $5,000, depreciation expense for the periods will be lower than it should have been.

Land improvements are not a depreciable asset.

How should an expenditure for an ordinary repair to factory equipment be recorded?

Belton Corporation uses straight-line depreciation and, for assets acquired during the fiscal year, follows the policy of recording a full month's depreciation for all assets acquired on or before the 15th of the month. No depreciation is recorded for the month if an asset is acquired after the 15th. On May 22, 20A, Belton purchased a car that cost $22,000 which had an estimated residual value of $2,000 and an estimated useful life of five years. To the nearest dollar, what is the amount of depreciation that should be recorded on the car for 20A?

Barnes Company purchased a machine on April 4, 2011, for $210,000. The machine had an estimated useful life of five years and a salvage value of $30,000. The machine is being depreciated using the double-declining-balance method. Barnes depreciates its assets from the first day of the month nearest the date of purchase. The asset balance, net of accumulated depreciation, at December 31, 2012, should be:

Trumble Company purchased a machine on January 1, 20B, for $10,000. The company bookkeeper incorrectly used a 6-year life instead of a 5-year life to depreciate the machine. What would be the effect of this error on the 20B financial statements?