Exam 8: Receivables, Bad Debt Expense, and Interest Revenue

FAL Corporation purchased a robot to be used in manufacturing. The purchase was made at the beginning of 20X1 by paying cash of $500,000. The robot has an estimated residual value of $20,000 and an expected useful life of ten years. At the beginning of 20X3, FAL concluded that the total useful life of the robot will be eight years rather than ten, and that the residual value will be zero. FAL uses the straight-line method for depreciation. Required: 1. Make the journal entry to record depreciation on the robot for 20X2. 2. Make the journal entry to record depreciation on the robot for 20X3, including the effect of the changes in estimates. 3. Describe how a business should account for a change in the estimated useful life and/or residual value of a depreciable asset.

The concept of depreciation is best explained by which accounting principle or assumption?

Building and equipment are recorded at their cost at acquisition and are subsequently reported at cost less accumulated depreciation.

Laforge Cement Company bought a piece of land with a building on it for a total of $4,400,000. They obtained two appraisals to estimate the fair values of the land and building. Appraisal 1 Appraisal 2 Land \ 1,200,000 \ 1,000,000 Building \ 3,600,000 \ 4,000,000 Required: 1. If management' s objectives are to minimize the amount of income tax they pay, which of the two appraisals should they use to allocate the purchase price? Explain your answer. 2. Based on your answer in part a calculate the amount to be allocated to the Land and the Building account. 3. Under what circumstances might management wish to use the other appraisal value ?

Tangible assets include which of the following?

Which of the following statements is true with respect to intangible assets with indefinite lives?

IFRS permits corporations to capitalize interest costs for

An asset being amortized with the straight-line method has a residual value of $20,000 and amortization expense of $25,000 in its second year. What was the original cost of the asset if its useful life was 10 years?