Exam 9: Reporting and Analyzing Long-Lived Assets

Faster Company purchased equipment in 2007 for $104,000 and estimated an $8,000 salvage value at the end of the equipment's 10-year useful life. At December 31, 2013, there was $67,200 in the Accumulated Depreciation account for this equipment using the straight-line method of depreciation. On March 31, 2014, the equipment was sold for $21,000. Prepare the appropriate journal entries to remove the equipment from the books of Faster Company on March 31, 2014. (b) Lewis Company sold equipment for $11,000. The equipment originally cost $25,000 in 2011 and $6,000 was spent on a major overhaul in 2014 (charged to the Equipment account). Accumulated Depreciation on the equipment to the date of disposal was $20,000. Prepare the appropriate journal entry to record the disposition of the equipment. (c) Selby Company sold equipment that had a book value of $13,500 for $15,000. The equipment originally cost $45,000 and it is estimated that it would cost $57,000 to replace the equipment. Prepare the appropriate journal entry to record the disposition of the equipment.

Additions and improvements

Presented below are selected transactions for the Tinker Company for 2015. Instructions Journalize all entries required as a result of the above transactions. Tinker Company uses the straight-line method of depreciation and has recorded depreciation through December 31, 2014.

Mideast Airlines purchased a 777 aircraft on January 1, 2012 at a cost of $40,000,000. The estimated useful life of the aircraft is 20 years, with an estimated salvage value of $6,000,000. Instructions Compute the accumulated depreciation and book value at December 31, 2014 using the straight-line method and the double-declining-balance method.

Intangible assets

Goodwill

Which of the following statements concerning financial statement presentation is false?

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

Accountants do not attempt to measure the change in a plant asset's market value during ownership because

On October 1, 2014, Mann Company places a new asset into service. The cost of the asset is $80,000 with an estimated 5-year life and $20,000 salvage value at the end of its useful life. What is the depreciation expense for 2014 if Mann Company uses the straight-line method of depreciation?

If a company incurs legal costs in successfully defending its patent, these costs are recorded by debiting

Tony's, a popular pizza hang-out, has a thriving delivery business. Tony's has a fleet of three delivery automobiles. Prior to making the entry for this year's depreciation expense, the subsidiary ledger for the fleet is as follows: Instructions (a) Determine the depreciation rates per mile for each car. (b) Determine the Depreciation Expense for each car for the current year. (c) Make one compound journal entry to record the annual Depreciation Expense for the fleet.

Expenditures that maintain the operating efficiency and expected productive life of a plant asset are generally

Recording depreciation each period is necessary in accordance with the

Wesley Hospital installs a new parking lot. The paving cost $45,000 and the lights to illuminate the new parking area cost $18,000. Which of the following statements is true with respect to these additions?

Conley Company purchased equipment for $60,000 on January 1, 2012, and will use the double-declining-balance method of depreciation. It is estimated that the equipment will have a 5-year life and a $3,000 salvage value at the end of its useful life. The amount of depreciation expense recognized in the year 2014 will be

A company purchased land for $350,000 cash. Real estate brokers' commission was $25,000 and $35,000 was spent for demolishing an old building on the land before construction of a new building could start. Under the historical cost principle, the cost of land would be recorded at

On March 1, 2014, Geoffrey Company acquired real estate, on which it planned to construct a small office building, by paying $85,000 in cash. An old warehouse on the property was demolished at a cost of $8,200; the salvaged materials were sold for $2,200. Additional expenditures before construction began included $1,500 attorney's fee for work concerning the land purchase, $5,500 real estate broker's fee, $9,100 architect's fee, and $16,000 to put in driveways and a parking lot. Instructions (a) Determine the amount to be reported as the cost of the land. (b) For each cost not used in part (a), indicate the account to be debited.

If a plant asset is retired and is fully depreciated

The cost of successfully defending a patent in an infringement suit should be