Exam 7: Operating Assets

Match the items and explain how each item should be accounted for. (Choices may be used more than once.) a.This item should be included as part of the cost of the equipment.b.This item should be considered a revenue expenditure. -A state agency required that a pollution-control device be installed on the equipment at a cost of $5,000.

A ____________________ is a cost that improves an operating asset and is therefore added to the asset account.

The following costs were incurred to acquire and prepare land for a new parking lot: purchase price for land, cost to clear the land, cost of paving, cost of lighting for the parking lot, and cost of landscaping for the parking lot. How should the company determine which costs should be recorded as Land Improvements and which costs should be recorded as Land?

Fuzziwig's Candles has two intangible assets. Information concerning each is provided in the following table: Calculate the amount of amortization expense that should be reported for 2013.

Match the items and explain how each item should be accounted for. (Choices may be used more than once.) a.This item should be included as part of the cost of the equipment.b.This item should be considered a revenue expenditure. -It was necessary for an architect to redesign the work space to accommodate the new equipment. A fee of $6,000 was paid.

Match the items and explain how each item should be accounted for. (Choices may be used more than once.) a.This item should be included as part of the cost of the equipment.b.This item should be considered a revenue expenditure. -The cash purchase was made on March 8 with terms of 2/10, net 30.

A company bought machinery on January 1, 2011, for $200,000. On January 2, 2013, the machinery had a book value of $100,000. It is estimated that the machine will generate future cash flows of $70,000 and its current fair value is $60,000. How much impairment loss should be recorded?

An accumulated ________ account is used when writing off natural resources.

Distinguish between tangible and intangible operating assets.

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.) a.Balance Sheet--Property, Plant, and Equipment b.Balance Sheet--Intangible Assets c.Balance Sheet--Current Assets d.Balance Sheet--Other Assets e.Income Statement--Operating Section f.Income Statement--Other Revenue and Expense Section -Gain on disposal of plant asset

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.) a.Balance Sheet--Property, Plant, and Equipment b.Balance Sheet--Intangible Assets c.Balance Sheet--Current Assets d.Balance Sheet--Other Assets e.Income Statement--Operating Section f.Income Statement--Other Revenue and Expense Section -Patents

-Refer to Fireworks City. Using the data for 2013, determine the average life of the company's property, plant, and equipment rounded to one decimal place.

Match the items and explain how each item should be accounted for. (Choices may be used more than once.) a.This item should be included as part of the cost of the equipment.b.This item should be considered a revenue expenditure. -$3,000 freight costs were paid to ship the equipment from the manufacturer,

The ______________ depreciation method is the GAAP depreciation method used most frequently.

Match these terms with their correct definition. a.Book value e.Depreciation b.Cost f.Impairment c.Depletion g.Involuntary disposal d.Depreciable cost h.Residual value -The amount of cash or trade-in consideration that is expected when an asset is retired from service

Using the straight-line depreciation method will cause a company to incur ____ tax expense in the early years of an asset's life than they would experience using an accelerated method of depreciation.

The more efficiently a company uses its fixed assets the lower will be the fixed asset turnover ratio.

Select the account to which each of the following costs would be debited. (Choices may be used more than once.) a.Land b.Land Improvements c.Buildings d.Machinery and Equipment e.An Expense Account -The transportation charges related to the acquisition costs of a new piece of machinery.

Match these terms with their correct definition. a.Franchise e.Organizational costs b.Intangible operating assets f.Property, plant, and equipment c.Natural resources g.Trademark d.Operating assets h.Voluntary disposal -Represent future economic benefit to the company but they lack physical substance

Given the following list of methods of depreciation, select the method that is best for the situation or purpose given. (Choices may be used more than once.) a.Straight-line b.Units-of-production c.Double-declining-balance d.MACRS -This method is the easiest to use.