Exam 6: Acquisition and Use of Long-Term Assets

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 double-declining balance method to depreciate its assets.The book value of the computer at December 31,2012 is ________.

Intangible assets are depreciated over their useful lives.

Depletion is the ________.

Which statement best describes the proper accounting treatment for long-term assets classified as property,plant,and equipment?

A machine was purchased for $100,000 in 2011 and used for four years,during which $40,000 of depreciation accumulated.The machine was then sold for $50,000 cash.What is the gain or loss on this transaction? Assume depreciation is up to date at the time of the sale.

Which statement about accelerated depreciation methods is TRUE?

Residual (salvage)value means the ________.

Able Company bought a machine on January 1,2008 for $80,000.At the time the machine was purchased it was estimated to have an 8-year useful life and a $4,000 salvage value.Able uses straight-line depreciation.During 2014,before the adjusting entry for depreciation was made,Able revised the estimated useful life of the machine to a total of ten years,with an estimated salvage value of $0.How much depreciation expense should the company report for the year ended December 31,2014?

A machine was purchased for $100,000 in 2011 and used for four years,during which $60,000 of depreciation accumulated.The machine was then sold for $50,000 cash.What is the gain or loss on this transaction? Assume depreciation is up to date at the time of the sale.

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 31,2013,using the straight-line method?

A major function of an internal control system is to safeguard assets from theft and damage.

Intangible assets are amortized over their useful lives.

On January 1,2011,Crunch Company paid $100,000 for equipment with an estimated useful life of 5 years and no residual value. Part A: Calculate the financial statement amounts using each of the depreciation methods below: Part B: 1.On January 1,2013,Crunch Company sold the equipment for $62,000 cash.Assume straight-line depreciation was used.For each financial statement line item,write in the correct amount in the column that represents the financial statement where the information is found: 2.Show the effect if the truck had been sold for $45,000 cash.

Which statement below best describes the meaning of return on assets (ROA)?

All of the following account titles are found in the computerized accounting system of GTV Company.Identify the account that would be a long-term asset.

What effect does depreciating a long-term asset have on the financial statements?

A client has asked you to review and correct the following income statement: Additional information: a.A $3,500 machine tune-up was recorded as an asset. b.The costs of buying a $120,000 piece of equipment on the last day of the fiscal year were treated as equipment expense. c.An asset with a cost of $230,000,a 10-year useful life,and a zero salvage value was depreciated $23,000 for the full year. d.The power and electricity costs of running a machine were treated as an expense for the year.The costs amounted to $56,000. e.The costs of insuring a piece of equipment while it was in transit amounted to $5,000,and those costs were capitalized. Required: 1.List any errors that you find. 2.Correct the errors and prepare another income statement.

On January 8,2011,Safari LLP bought three buildings at a total cost of $60,000,000 by making a cash down payment of $10,000,000 and signing a 3-year note with 5% interest for the remainder.One of the buildings is in Havana,one is in Cancun,and the third is in Miami.The fair market value of the buildings,if they had been purchased separately,would have been $15,000,000,$36,000,000,and $24,000,000 respectively. Required: Use the relative fair market value method to determine how much of the $60,000,000 purchase price should be used for each of the three separate buildings.Write your answers on the lines provided and show your work in the space provided below each line. $______________________ should be used for the cost of the building in Havana. $______________________ should be used for the cost of the building in Cancun. $______________________ should be used for the cost of the building in Miami.

Team instructions: Divide the class into teams of three or four people.Give the students time in class to answer the following questions.Students need access to both the Team Shirts,financial statements and the transactions to be able to answer these questions.Each team should turn in only one copy of the answers for grading.All team members will receive the same grade. Use the Team Shirts,financial statements for April,May,and June to answer the following:

A loss on the sale of a long-term asset is recorded when cash proceeds are ________.