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

Los Mi-os purchased a large tract of land with the intention to transform it into a cocoa plantation. Before the new seedlings can be planted, the site, which is prone to flooding, must be drained. The cost of the draining should be

Hershon Inc. acquires a new machine. It is comprised of 2 different identifiable components the P922 and the B14. Each of these components is expected to be overhauled at different intervals. The acquisition cost of the entire machine is as follows: Component P922: \ 198,000 Component R14: \ 240,000 Total \ 438,000 Component P922 is expected to have a useful life of five years and a residual value of $\$ 20,000$ before the first major overhaul is required. Component R14 is expected to have a useful life of seven years and a residual value of $\$ 15,000$ before its first overhaul. -At the beginning of year six, component P922 undergoes a major overhaul at a cost of $100,000. The work is expected to extend its life by 3 years with a residual value of zero. Hershon uses the straight-line method to depreciate this asset. What will be the net book value of component P922 one year after the overhaul?

When an entire business is purchased, goodwill is the excess of cost over the carrying amount of the net identifiable assets acquired.

The fixed asset turnover ratio measures how much profit is generated by use of operational (fixed) assets.

Bangor Industries purchased a car for $22,000 on January 1, 20X1. The car had an estimated useful life of 80,000 kilometers and an estimated residual value of $4,000. In the second year of ownership (20X2), the car was driven 25,000 kilometers. Using the units-of-production method, what was the amount of depreciation expense for 20X2?

The records of Pam Company showed the following about a machine on January 1, 20X8: Purchased 1/1/20X5 for $35,000 Accumulated depreciation at January 1, 20X8, $26,400 On July 1, 20X8, the machine was sold for $7,000. Depreciation for the first six months of 20X8 was $1,467. The gain or loss on disposal would be which of the following?

All of the following are examples of intangible assets except:

Sure Company purchased a machine on January 1, 20X1, at a cash cost of $12,000. The estimated useful life is 10 years, and the estimated residual value is $3,000. The company will use the declining-balance method based on a 150 percent acceleration rate. What will be the depreciation expense for the second year?

Newson's Courier Service recently purchased a new delivery van for $29,000. The van is estimated to have a useful life of 8 years or 250,000 kilometers. The van will have a residual value of $1,000. The company uses the units-of-production method of depreciation. Assuming the van travelled 36,000 kilometers. during the first year, what is the depreciation expense for the van in year 1?

The estimate of residual value made at the beginning of the useful life has no relationship to the book value at the end of the asset's useful life.

If an accountant calculates depreciation expense on an asset without taking into account the asset's residual value of $5,000, depreciation expense for the periods will be lower than it should have been.

On January 1, 20X1, Stern Company (a calendar year corporation) purchased a heavy-duty machine having an invoice price of $13,000 plus transportation and installation costs of $3,000. The machine is estimated to have a 4-year useful life and a $1,000 residual value. Assuming the company uses the declining-balance method depreciation and a 150% acceleration rate, complete the following schedule (round to the nearest dollar). Date Depreciation Expense (for the year) Book Value (at the end of the year) 12/31/20X1 12/31/20X2 12/31/20X3 12/31/20X4

Regardless of the method of depreciation used under international financial reporting standards, the ending book value will be the same at the end of the asset's economic life.

AA Riser owns machinery for moving and delivering plants to its customers. The recorded cost of the machinery is $38,000. It is estimated that the machinery will be able to move 120,000 plants over its life. The company depreciates the machinery using straight-line depreciation over a useful life of twelve years and an estimated residual value of $2,000. The amount that will be charged annually as depreciation will be:

Carpenter Corporation purchased a mineral deposit, making payment as follows: Cash $10,000 and 6,000 Carpenter Corporation common shares. On the date of the purchase, the mineral deposit had an appraised value of $75,000; the common shares were quoted on the market at $11 per share. Other acquisition costs amounted to $3,000 cash. What was the cost recorded for the mineral deposit?

Intangible assets include which of the following?

Helm Corporation purchased a machine with an initial cost of $80,000, a residual value of $5,000, and an estimated useful life of 10 years. At the beginning of the fifth year, Helm spent $10,000 for an extraordinary repair. Following the repair, Helm estimated that the machine had a remaining useful life of 8 years, and that the residual value was unchanged. Calculate depreciation expense on the machine for the fifth year, assuming that Helm uses the straight-line method.

Which of the following is not a factor affecting the calculation of straight-line depreciation?

The following information is available for C Co. and P Co: P Co. Net fixed assets (beginning of year) \ 3,743 \ 6,261 Net fixed assets (end of year) 3,669 7,318 Net sales for the year 18,813 22,348 Net income for the year 3,533 1,993 Compute the fixed asset turnover ratio for the year for both C Co. and P Co.

If a trademark is developed internally, it cannot be recognized as an intangible asset on the statement of financial position.