Exam 9: Reporting and Analyzing Long-Lived Assets

A truck costing $14,000 and on which $12,000 of accumulated depreciation has been recorded was disposed of for $3,000 cash. The entry to record this event would include a

When a change in estimate is made, there is no correction of previously recorded depreciation expense.

Leasehold improvements are depreciated over the remaining life of the lease or the useful life of the improvements, whichever is longer.

Use the following information for questions Pierre's Pet Shop Limited bought new grooming equipment on January 1, 2012 for $13,000. The useful life is estimated to be 3 years with a residual value of $1,000. The company uses straight-line depreciation. On January 1, 2013, Pierre determined that the value of the equipment is impaired, as its recoverable amount is expected to be $4,800. -The carrying amount of the equipment after the journal entry for impairment is recorded is

The carrying amount of an asset is the original cost less anticipated residual value.

Which of the following is not true for an operating expenditure?

A truck costing $15,000 and on which $14,000 of accumulated depreciation has been recorded was discarded as having no value. The entry to record this event would include a

The depreciable amount of property, plant, and equipment is its original cost minus the depreciation for the current year.

Which of the following statements is incorrect?

If a company incurs legal costs in unsuccessfully defending its patent, these costs would be debited to

When an entire business is purchased, goodwill is the excess of cost over the carrying amount of the net identifiable assets acquired.

The cost of a depreciable long-lived asset is expensed

A truck costing $32,000 was destroyed when its engine caught fire. At the date of the fire, the accumulated depreciation on the truck was $16,000. An insurance cheque for $37,000 was received based on the replacement cost of the truck. The entry to record the insurance proceeds and the disposition of the truck will include a

The asset turnover ratio is calculated as net sales divided by ending total assets.

The carrying amount of an asset is equal to the

The cost of a patent should be amortized over its legal life or useful life, whichever is shorter.

Impairment losses on goodwill are never reversed.

Equipment was purchased for $20,000. It is estimated that the equipment will have a $3,000 residual value at the end of its 5-year useful life. Using the straight-line method, annual depreciation expense will be

If the carrying amount of an asset equals its fair value at the date of sale, then

A truck was purchased for $40,000 and it was estimated to have a $4,000 residual value. Using the straight-line method, monthly depreciation expense of $600 was recorded. Therefore, the annual depreciation rate as a percent is