Exam 9: Reporting and Analyzing Long-Lived Assets

An asset was purchased for $100,000. It had an estimated salvage value of $25,000 and an estimated useful life of 10 years. After 5 years of use, the estimated salvage value is revised to $20,000 but the estimated useful life is unchanged. Assuming straight-line depreciation, depreciation expense in Year 6 would be

An expenditure for which of the following items would be considered a revenue expenditure?

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

A loss on disposal of a plant asset occurs if the cash proceeds received from the asset sale is less than the asset's book value.

If the proceeds from the sale of a plant asset exceed its book value, a gain on disposal occurs.

Forcum Company reports the following information (in millions) during a recent year: net sales, $12,408.5; net earnings, $344.9; total assets, ending, $4,312.6; and total assets, beginning, $4,254.3. Instructions (a) Calculate the (1) return on assets, (2) asset turnover, and (3) profit margin ratios. (b) Prove mathematically how the profit margin and asset turnover ratios work together to explain return on assets, by showing the appropriate calculations.

A plant asset with a cost of $240,000 and accumulated depreciation of $228,000 is sold for $28,000. What is the amount of the gain or loss on disposal of the plant asset?

If a plant asset is sold at a gain, the gain on disposal should reduce the cost of goods sold section of the income statement.

Companies only dispose of plant assets by either sale or exchange.

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

Research and development costs that result in a successful product that is patentable are charged to the Patent account.

Kendrick Company was organized on January 1. During the first year of operations, the following expenditures and receipts were recorded in random order. Instructions Analyze the foregoing transactions using the following tabular arrangement. Insert the number of each transaction in the Item space and insert the amounts in the appropriate columns.

Depreciation is the process of allocating the cost of a plant asset over its useful life in a(n)

Mitchell Corporation bought equipment on January 1, 2014 .The equipment cost $180,000 and had an expected salvage value of $30,000. The life of the equipment was estimated to be 6 years. The depreciable cost of the equipment is

All of the following statements regarding impairments are true except

Ron's Quik Shop bought equipment for $70,000 on January 1, 2013. Ron estimated the useful life to be 5 years with no salvage value, and the straight-line method of depreciation will be used. On January 1, 2014, Ron decides that the business will use the equipment for a total of 6 years. What is the revised depreciation expense for 2014?

Vineyard Company sold the following two pieces of equipment in 2014: Instructions Journalize all entries required to update depreciation and record the sales of the two assets in 2014. The company has recorded depreciation on the equipment through December 31, 2013.

If disposal of a plant asset occurs during the year, depreciation is

Salvage value is not subtracted from plant asset cost in determining depreciation expense under the declining-balance method of depreciation.

The depreciation method that applies a constant percentage to depreciable cost in calculating depreciation is