Exam 8: Reporting and Analyzing Long-Lived Assets

Recording depreciation on plant assets affects the balance sheet and the income statement.

Aber Company buys land for $145,000 on 12/31/16. As of 3/31/17, the land has appreciated in value to $151,000. On 12/31/17, the land has an appraised value of $155,400. By what amount should the Land account be increased in 2017?

Which of the following methods will result in the highest depreciation in the first year?

On May 1, 2017, Irwin Company purchased the copyright to Quick Computer Tutorials for $120,000. It is estimated that the copyright will have a useful life of 5 years. The amount of amortization expense recognized for the year 2017 would be

In computing depreciation, salvage value is

A company purchased land for $94,000 cash. Real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Proceeds from salvage of the demolished building was $1,200. Under the historical cost principle, the cost of land would be recorded at

Additions and improvements

In recording the acquisition cost of an entire business

When purchasing land, the costs for clearing, draining, filling, and grading should be charged to a Land Improvements account.

Bates Company purchased equipment on January 1, 2016, at a total invoice cost of $1,200,000. The equipment has an estimated salvage value of $30,000 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at December 31, 2017, if the straight-line method of depreciation is used?

An asset was purchased for $400,000. It had an estimated salvage value of $80,000 and an estimated useful life of 10 years. After 5 years of use, the estimated salvage value is revised to $64,000 but the estimated useful life is unchanged. Assuming straight-line depreciation, depreciation expense in Year 6 would be

Rains Company purchased equipment on January 1 at a list price of $125,000, with credit terms 2/10, n/30. Payment was made within the discount period. Rains paid $6,250 sales tax on the equipment, and paid installation charges of $2,200. Prior to installation, Rains paid $5,000 to pour a concrete slab on which to place the equipment. What is the total cost of the new equipment?

The IRS does not require the taxpayer to use the same depreciation method on the tax return that is used in preparing financial statements.

Equipment with a cost of $450,000 has an estimated salvage value of $30,000 and an estimated life of 4 years or 10,000 hours. It is to be depreciated by the units-of-activity method. What is the amount of depreciation for the first full year, during which the equipment was used 2,700 hours?

On January 1, a machine with a useful life of five years and a salvage value of $25,000 was purchased for $125,000. What is the depreciation expense for year 2 under straight-line depreciation?

Which one of the following items is not considered a part of the cost of a truck purchased for business use?

The depreciable cost of a plant asset is its original cost minus obsolescence.

A company purchased factory equipment on June 1, 2017, for $128,000. It is estimated that the equipment will have a $8,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2017, is

The book value of an asset will equal its fair value at the date of sale if

Interline Trucking purchased a tractor trailer for $112,000. Interline uses the units-of-activity method for depreciating its trucks and expects to drive the truck 1,000,000 miles over its 12-year useful life. Salvage value is estimated to be $16,000. If the truck is driven 80,000 miles in its first year, how much depreciation expense should Interline record?