Exam 6: Acquisition and Use of Long-Term Assets

Cranberry Company purchased two pieces of equipment from a Canadian vendor for $400,000.If the assets had been purchased separately,the company would have paid $90,000 for the first piece of equipment and $360,000 for the second piece of equipment.What amount should be recorded for the FIRST piece of equipment?

The following information is available for Row,Inc. 1.The return on assets for 2012 is ________________%,rounded to one decimal place. 2.The return on assets for 2013 is ________________%,rounded to one decimal place. 3.Was there an improvement in the return on assets?__________ 4.The asset turnover ratio for 2012 is ______________,rounded to one decimal place. 5.The asset turnover ratio for 2013 is ______________,rounded to one decimal place. 6.Was there an improvement in the asset turnover ratio?_____________

Which depreciation method will result in the most total depreciation expense being recognized over a depreciable asset's entire life?

What are natural resources? Give some examples.How are they accounted for?

Which depreciation method is most like the method that is used to calculate depletion of natural resources?

Which of the following depreciation methods is used only on federal tax returns?

How many of the following depreciation methods result in reporting larger depreciation expense in the early years of asset ownership than is reported in the later years?

On January 1,2011,Petrel Shipping Company bought equipment that cost $55,000 with an estimated useful life of 4 years and an estimated salvage value of $5,000.The company uses the straight-line method of depreciation.At what rate will the equipment depreciate in 2011?

According to GAAP,which of the following items about long term-assets must be disclosed,either in the financial statements or in the related footnotes?

On January 1,2011,XYZ Company bought a new,$2,000,000 mainframe computer.Because of rapid changes in technology and XYZ's plans for growth,the computer has only a five-year useful life and no salvage value.The chief financial officer for XYZ has decided that the company should depreciate the computer using the straight-line method rather than the double-declining balance method. 1.Calculate depreciation expense for 2011 using the straight-line method. 2.Calculate depreciation expense for 2011 using the double-declining balance method. 3.What would the difference be in 2011 net income for XYZ if it chooses the straight-line method rather than double-declining balance? 4.Is it ethical for the chief financial officer to choose the straight-line method?

Explain why certain long-term assets are depreciated,amortized,or depleted instead of remaining in the accounting records at cost until the time of disposal.

Generally accepted accounting principles (GAAP)require that long-term assets be expensed over their useful lives using the straight-line method.

Under U.S.GAAP,research and development costs (R&D)are ________.

On January 1,2011,Ace Electronics paid $400,000 cash for a computer that would be used to store and process its accounting information.The computer has a 5-year useful life,after which it will be worthless because it will be obsolete.How much depreciation expense should Ace Electronics record for the year ended December 31,2011,using the straight-line method?

On January 1,2011,Ace Electronics paid $400,000 cash for a computer that would be used to store and process its accounting information.The computer has a 5-year useful life,after which it will be worthless because it will be obsolete.Ace Electronics uses the straight-line method to depreciate its assets.The book value of the computer at December 31,2013 is:

On January 1,2011,Handy Manufacturing Company paid $50,000 for equipment with an estimated useful life of 5 years and $3,000 expected salvage value.The company uses straight-line depreciation.If the adjustment for depreciation is NOT made,net income for the year ended December 31,2011 will be ________.

A loss is a ________.

Identify the appropriate accounting treatment for each of the payments listed below using the following code: C = Capitalize E = Expense N = Neither of the above ______ 1.$5,000 spent to improve the working condition of a truck ______ 2.$10,000 spent to pay a liability ______ 3.Bought a machine that cost $40,000 ______ 4.Distributed $3,000 cash to the owners ______ 5.Spent $78 tuning up a truck ______ 6.Spent $234 to have a piece of equipment shipped to the warehouse where it will be used ______ 7.$17,000 spent to make a crushing machine work faster ______ 8.$16,000 spent to make a trash compactor work more efficiently ______ 9.Paid the monthly fee to have the factory equipment oiled ______ 10.Paid an architect $5,600 to design an office building

To "capitalize" means to record a cost as an asset.

Put an X in the appropriate box to show whether each of the following is an internal control strength or weakness in minimizing the risks associated with long-term assets.