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

On September 7, 20X2, Belverd Corporation purchased a building and land at a total acquisition cost of $500,000. An appraiser estimated that 80% of the purchase price should be assigned to the building and the remainder to the land. Required: 1. Make the journal entry for the acquisition of the land and building. 2. Make the journal entry to record depreciation of the building for 20X2. Belverd tak es a full month of depreciation for assets acquired in the first half of the month and uses the straight-line method. The building has a residual value of $40,000 and an estimated useful life of 20 years. 3. Based on the information in part 2, what will the book value of the building be at the end of 20X3? 4. Why was it important for Belverd to separate the cost of the land and the cost of the building ?

Amortization is about valuation rather than allocation.

When an operational asset is acquired for non-cash consideration, the cost of the asset received always is measured as the book value of the non-cash consideration given up.

Martinelli Company recently purchased a truck. The price negotiated with the dealer was $85,000. Martinelli also paid sales tax of $6,000 on the purchase, shipping and preparation costs of $950, and insurance for the first year of operation of $2,000. For the truck, what amount should be debited to the asset account Vehicles?

How is the matching principle related to the recording of depreciation on tangible operational assets?

A loss on disposal results if the cash proceeds received from the asset sale are less than the asset's carrying amount.

What are operational assets that have physical substance called?

Duval Company acquired a machine on January 1, 20X1 that cost $2,700 and had an estimated residual value of $200. Complete the following schedule using the three methods of depreciation: A.) straight-line, B.) units-of-production, C.) declining-balance at 150% acceleration rate. Method Estimated Useful Life Depreciation Expense for 20X2 Accumulated Depreciation 12/31/20\times2 A. Straight Line 5 years B. Units of Production 10,000 units (total) 1,000 units (20X1's actual) 1,200 units (20X2's actual) C. Declining Balance 5 years

The cost of a finite life intangible asset is not amortized, but the asset is tested for impairment.

The cost of a patent should be amortized over the shorter of its economic life and its remaining legal life.

One example of a capital expenditure is ordinary maintenance cost such as an oil change for a company truck.

Amortization expense is a result of the expense recognition principle.

When determining whether to capitalize or expense an amount relating to fixed assets, which of the following is not relevant to the decision?

In 20X5, Barton Iron Ore Co purchased a mine for $200 million ($30 million was applicable to the land). An independent evaluation estimated the mine's iron ore reserves at 7.5 million tons. In 20X5, Barton Co extracted 0.9 million tons. The company's depletion expense for 20X5 is:

A company decided to use the units-of-production method to calculate depreciation on a car to be driven by the sales manager. The amount of annual depreciation will vary with which of the following?

When Ford Motor Company expenses a $200 tool used in manufacturing, instead of capitalizing its cost as an asset, it does so because of the conservatism convention.

Which of the following is not a major characteristic of a property, plant, and equipment asset?

To which account should the amount of sales tax paid on the purchase of new machinery be debited?

All the following are examples of intangible assets except:

Under what conditions would a company most likely adopt the double-declining-balance method for financial reporting?