Exam 7: Fixed Assets and Intangible Assets

A company purchased an oil well for $10 million.It is estimated that 5 million barrels can be extracted from the well.Determine depletion expense assuming 4 million barrels are extracted and sold during the year.

If an asset is discarded,a loss is recognized equal to its salvage value.

If a revenue expenditure is treated as a capital expenditure,then:

A machine was purchased for $68,000.It has a useful life of 5 years and a residual value of $8,000.Determine the annual depreciation expense using the straight-line method?

Which of the following intangible assets are amortized over their useful life?

A pressurized spray painter was purchased on April 1 of the fiscal year for $3,900.It has a useful life of 4 years and a residual value of $300.Determine depreciation expense for the first two years,assuming a fiscal year end of December 31 and using (a)the straight-line method and (b)the double-declining-balance method.

Fixed assets are reported at their book value on the balance sheet.

If a fixed asset is sold and the book value of the asset is less than its selling price,the company must:

For each of the following items indicate whether the transactions listed below increased (+),decreased (-)or had no effect (o)by inserting the appropriate symbol.

An equipment was purchased for $30,000.It has a useful life of 5 years,and a residual value of $4,000.Compute the depreciation expense for the second year using the double-declining-balance method.