Exam 7: Operating Assets

The following costs were incurred to acquire and prepare land for a new parking lot: purchase price of land, $900,000; cost to clear the land, $40,000; cost of paving, $35,000; and cost of lighting for the parking lot, $20,000. How much should be recorded in the Land Improvements account?

A company purchased land and incurred the following costs: What is the cost of the land?

The two items that must be estimated with respect to a plant asset in order to properly allocate cost to the affected accounting periods are ____________________ and ____________________.

Fleet Rentals purchased equipment with a cost of $200,000 at the beginning of 2013. The equipment has an estimated life of 10 years or 100,000 units of product. The estimated residual value is $20,000. During 2013, 11,000 units of product were produced with this machinery. Determine the following:

Flying High Air acquires a new aircraft. It has an estimated life of 10 years and should last for at least 20,000 hours of flight. What is the most appropriate method of depreciation to properly match revenues and expenses?

The intangible asset called ____________________ can only exist if one company purchases another business and the cost exceeds the fair market values of the identifiable net assets at the time acquired.

Depreciation has an effect on the company's income taxes.

Describe the relationship between the depreciation method chosen and income taxes paid in the early years of asset life.

Research and development costs are

If a company uses the same depreciation method as other firms in the same industry, investors will have enhanced comparability of the financial reporting results.

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 -Consist of the long-lived assets that are owned by a business

Refer to Fernbank Farms. What amount should be recorded as depreciation expense each year starting in 2013?

-Refer to Fabulous Creations. The company spends significant dollars on research and development initiatives each year to develop new products that allow it to remain competitive. Yet, the company's balance sheet does not reflect these costs. Why?

Fanatics Company purchased a patent at the beginning of 2013 for $450,000. Economic benefits were expected for only 10 years, but the patent's legal life is 20 years. Also during 2013, the company incurred research and development costs of $185,000.

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 -Copyright

Which statement is true concerning operating assets?

Equipment with a residual value of $50,000 at the end of 10 years was acquired at the beginning of 2011 for $500,000. Assuming the use of the straight-line depreciation method, the journal entry to record depreciation expense for 2013 will have a debit to

Refer to Fabian Woodworks. Based on the information presented above, what method of depreciation will maximize depreciation expense in 2013?

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 -Depreciation expense

Refer to Fabian Woodworks. Based on the information presented above, what method of depreciation will maximize depreciation expense in 2012?