Exam 8: Reporting and Analyzing Long-Lived Assets

A computer company has $3,500,000 in research and development costs. Before accounting for these costs, the net income of the company is $2,800,000. What is the amount of net income or loss before taxes after these research and development costs are accounted for?

Foyle Company purchased a new van for floral deliveries on January 1, 2016. The van cost $56,000 with an estimated life of 5 years and $14,000 salvage value at the end of its useful life. The double-declining-balance method of depreciation will be used. What is the balance of the Accumulated Depreciation account at the end of 2017?

Hopson Company incurred $900,000 of research and development costs in its laboratory to develop a new product. It spent $120,000 in legal fees for a patent granted on January 2, 2017. On July 31, 2017, Hopson paid $90,000 for legal fees in a successful defense of the patent. What is the total amount that should be debited to Patents through July 31, 2017?

Goodwill

A machine costing $176,000 was destroyed when it caught fire. At the date of the fire, the accumulated depreciation on the machine was $80,000. An insurance check for $200,000 was received based on the replacement cost of the machine. The entry to record the insurance proceeds and the disposition of the machine will include a

A company purchases a remote building site 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?

Certain types of leases, called capital leases, allow the lessee to account for the transaction as a rental.

Research and development costs

Salem Company hired Kirk Construction to construct an office building for ₤8,000,000 on land costing ₤2,000,000, which Salem Company owned. The building was complete and ready to be used on January 1, 2017 and it has a useful life of 40 years. The price of the building included land improvements costing ₤600,000 and equipment costing ₤750,000. The useful lives of the land improvements and the equipment are 10 years and 5 years, respectively. Salem Company uses component depreciation, and the company uses straight-line depreciation for other similar assets. What total amount of depreciation expense would Salem Company report on its income statement for the year ended December 31, 2017?

Depreciation is a process of

An asset was purchased for ¥200,000. It had an estimated residual value of ¥40,000 and an estimated useful life of 10 years. After 5 years of use, the estimated residual value is revised to ¥32,000 but the estimated useful life is unchanged. Assuming straight-line depreciation, depreciation expense in year 6 would be

A characteristic of a plant asset is that it is

Sprague Associates sold office furniture for $48,000. The furniture had an original cost of $144,000 and accumulated depreciation of $72,000. Ignoring the tax effect, as a result of the sale

All the following are needed for the computation of depreciation except

Which of the following is not considered an intangible asset?

A plant asset must be fully depreciated before it can be removed from the books.

A machine with a cost of $640,000 has an estimated salvage value of $40,000 and an estimated useful life of 5 years or 15,000 hours. It is to be depreciated using the units-of-activity method of depreciation. What is the amount of depreciation for the second full year, during which the machine was used 5,000 hours?

An asset that cannot be sold individually in the market place is

A company purchased office equipment for $30,000 and estimated a salvage value of $6,000 at the end of its 8-year useful life. The constant percentage to be applied against book value each year if the double-declining-balance method is used is

Which depreciation method is most frequently used in businesses today?