Exam 9: Reporting and Analyzing Long-Lived Assets

Equipment that cost $72,000 and on which $60,000 of accumulated depreciation has been recorded was disposed of for $18,000 cash. The entry to record this event would include a

Under U.S. GAAP

Kathy's Blooms purchased a delivery van with a $50,000 list price. The company was given a $5,000 cash discount by the dealer, and paid $2,500 sales tax. Annual insurance on the van is $1,250. As a result of the purchase, by how much will Kathy's Blooms increase its van account?

The term applied to the periodic expiration of a plant asset's cost is

An asset was purchased for $300,000. It had an estimated salvage value of $60,000 and an estimated useful life of 10 years. After 5 years of use, the estimated salvage value is revised to $48,000 but the estimated useful life is unchanged. Assuming straight-line depreciation, depreciation expense in Year 6 would be

Land improvements are generally charged to the Land account.

Equipment costing $70,000 with a salvage value of $14,000 and an estimated life of 8 years has been depreciated using the straight-line method for 2 years. Assuming a revised estimated total life of 6 years and no change in the salvage value, the depreciation expense for Year 3 would be

Which of the following is not true of ordinary repairs?

Phill Co. has equipment that cost $50,000 and has been depreciated $30,000. Instructions Record entries for the disposal under the following assumptions. (a) It was scrapped as having no value. (b) It was sold for $23,000. (c) It was sold for $18,000.

Which of the following is not an intangible asset arising from a government grant?

The cost of an intangible asset must be amortized over a 20-year period.

A company purchased land for $84,000 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

The Rowland Clinic purchased a new surgical laser for $84,000. The estimated salvage value is $4,000. The laser has a useful life of five years and the clinic expects to use it 10,000 hours. It was used 1,600 hours in year 1; 2,100 hours in year 2; 2,400 hours in year 3; 1,900 hours in year 4; 2,000 hours in year 5. Instructions (a) Compute the annual depreciation for each of the five years under each of the following methods: (1) straight-line. (2) units-of-activity. (b) If you were the administrator of the clinic, which method would you deem as most appropriate? Justify your answer. (c) Which method would result in the lower reported income in the first year? Which method would result in the lower total reported income over the five-year period?

All plant assets (fixed assets) must be depreciated for accounting purposes.

Management should select the depreciation method that

Certain types of leases, called capital leases, allow the lessee to account for the transaction as a rental.

Which of the following statements concerning IFRS and U.S. GAAP is correct?

Equipment was purchased for $68,000 on January 1, 2013. Freight charges amounted to $2,800 and there was a cost of $8,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. What is the amount of accumulated depreciation at December 31, 2014, if the straight-line method of depreciation is used?

Equipment was acquired on January 1, 2011, at a cost of $170,000. The equipment was originally estimated to have a salvage value of $10,000 and an estimated life of 10 years. Depreciation has been recorded through December 31, 2013, using the straight-line method. On January 1, 2014, the estimated salvage value was revised to $16,000 and the useful life was revised to a total of 8 years. Instructions Determine the depreciation expense for 2014.

Redeker Company purchased equipment on January 1, 2013, for $90,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 5-year useful life. It is also estimated that the equipment will produce 100,000 units over its 5-year life. Instructions Answer the following independent questions. 1. Compute the amount of depreciation expense for the year ended December 31, 2013, using the straight-line method of depreciation. 2. If 16,000 units of product are produced in 2013 and 24,000 units are produced in 2014, what is the book value of the equipment at December 31, 2014? The company uses the units-of-activity depreciation method. 3. If the company uses the double-declining-balance method of depreciation, what is the balance of the Accumulated Depreciation-Equipment account at December 31, 2015?