Exam 7: Operating Assets

A contra account called ____________________ is used to depreciate property, plant, and equipment.

Flossil Fossils Company purchased a tract of land containing coal in the current year for $20,000,000 and then spent $30,000,000 to get a mine ready for operation. The company estimates that there will be 10,000,000 tons of coal available over the next 10 years. The land has a residual value of $500,000. During the current year, 1,000,000 tons of coal were mined. A)Compute the cost of the natural resource and the depletion rate. B)Record the journal entry as of December 31 for the current year depletion.

Fields of Green, a turf farm, purchased equipment at the beginning of 2019 for $175,000. In addition, the company paid $6,000 for delivery of the equipment and $4,000 for set up charges. The equipment has an estimated residual value of $5,000 and an estimated life of 10 years or 50,000 hours of operation. The equipment was operated for 5,200 hours in 2019 and 5,000 hours in 2020. A)Compute the depreciation expense for 2019 using the: - straight line method; - units-of-production method; - double-declining-balance method B)Compute the book value of the equipment on December 31, 2020, assuming the use of: - straight line method; - units-of-production method; and - double-declining-balance method C)Which method of depreciation produces the greatest total amount of depreciation? D)Which method of depreciation is considered accelerated? E)What are the advantages of using an accelerated depreciation method as compared to the straight-line method?

Match these terms with their correct definition. -The amount of cash or trade-in consideration that is expected when an asset is retired from service

The following costs were incurred to acquire and prepare land for a new parking lot: purchase price for land, cost to clear the land, cost of paving, cost of lighting for the parking lot, and cost of landscaping for the parking lot. How should the company determine which costs should be recorded as Land Improvements and which costs should be recorded as Land?

Fireworks City Information for 2020 and 2019 is presented below for this company which uses the straight-line depreciation method. -Refer to Fireworks City. Determine the asset turnover ratio for 2020.

Describe the process that allocates the costs of the tangible and intangible operating assets to expense.

Fabian Woodworks ​ This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020. -Refer to Fabian Woodworks. Based on the information presented above, what method of depreciation will maximize depreciation expense in 2020?

Flying High Air acquires a new aircraft. It has an estimated life of 10 years and should last for at least 20,000 hours of flight. What is the most appropriate method of depreciation to properly match revenues and expenses?

Fernbank Farms ​ This company purchased a semi truck at the beginning of 2019 at a cost of $100,000. The truck had an estimated life of 5 years, an estimated residual value of $20,000, and will be depreciated using the straight-line method. On January 1, 2021, the company made major repairs of $30,000 to the truck that extended the life 3 years. Thus, starting with 2021, the truck has a remaining life of 5 years and a new salvage value of $8,000. -Refer to Fernbank Farms. What is the truck's book value at December 31, 2021?

Which statement is true concerning operating assets?

Fantasy Cruise Lines ​ On January 1, 2019 the company purchased a ship for $1,000,000. It has a 10-year useful life and a residual value of $100,000. The company uses the double-declining-balance method. -Refer to Fantasy Cruise Lines. Compute the amount of depreciation expense for the year ended December 31, 2019.

Which of the following is not a reason to revise the amount of depreciation expense?

Fitness Depot purchased a building on a tract of land and allocated the entire cost of the purchase to building. Normally the company depreciates buildings over 40 years using the straight-line method with zero residual value and does not depreciate land. Because of the improper accounting treatment of the purchase, the company's income for the next 20 years will be

Given below are costs incurred during 2019 and 2020 by a company that follows the policy of decreasing the intangible asset account directly as amortized. Research was conducted to discover a new product and costs of $400,000 in 2019 and $800,000 in 2020 were incurred. After several months, a product was created and a patent secured for a cost of $180,000, effective as of July 1, 2020. The company expects to have increased revenues of $500,000 over the next several years. The patent is expected to be useful for the next 10 years. A)Prepare a partial income statement for the year ended December 31, 2020. B)How should the $800,000 cost incurred in 2020 be reported on the financial statements?

Fabian Woodworks ​ This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020. -Refer to Fabian Woodworks. What amount will be reported as depreciation expense over the 5-year life of the equipment?

Plant assets are depreciated because

Generally accepted accounting principles (GAAP) require that research and development costs to develop a new product be

Futronics purchased a truck at the beginning of 2019 for $41,500 and decided to depreciate it over a 6-year period using the straight-line method. The estimated residual value was $5,500. At the beginning of 2020, the company determined that a 4-year life should have been used to depreciate the truck. The estimated residual value was not affected by the revision in the asset's life. A)Determine the amounts to be recorded as depreciation expense for 2019 and 2020. B)What factors may have influenced the change in useful life?

A company uses plant assets that are subject to rapid decreases in value due to obsolescence and physical deterioration. Which of the following depreciation methods is most appropriate to measure the decline in the usefulness of this company's assets?