Exam 8: Reporting and Analyzing Long-Term Assets

A company purchased a computer system on January 1,2012,for $1,600,000.Prepare the journal entries to record depreciation for the first six months of 2014 and the sale of the computer assuming it is sold on July 1,2014,for $1,000,000 cash.The straight-line method of depreciation was used based on an expected life of six years and a salvage value of $130,000.

Plant assets are used in everyday operations of the business and have useful lives that extend over more than one accounting period.

A company had net sales of $230,000 for 2013 and $288,000 for 2014.The company's average total assets for 2013 were $150,000 and $180,000 for 2014.Calculate the total asset turnover for each year and comment on the company's efficiency in the use of its assets.

The purchase of a property that included land,building,and improvements is called a lump-sum purchase.

What are the general accounting procedures for recording asset disposals?

A company purchased land with a building for a total cost of $2,570,000 ($500,000 paid in cash and the balance on a long-term note).It was estimated that the land and building had market values of $900,000 and $2,100,000,respectively. Determine the cost to be apportioned to the land and to the building and prepare the journal entry to record the acquisition.

Salvage value is an estimate of an asset's value at the end of its benefit period.

A company purchased equipment for $325,000 on January 2,2013.The company expects the equipment to last for eight years or 60,000 hours of operation,with an estimated salvage value of $25,000.During 2013,the equipment was in operations for 8,000 hours,while in 2014 the equipment was in operations for 8,700 hours.Compute the depreciation expense relating to the equipment for 2013 and 2014 using the following depreciation methods: a.Straight-line b.Double-declining-balance c.Units-of-production.

A company purchased a machine on January 1 of the current year for $750,000.Calculate the annual depreciation expense for each year of the machine's life (estimated at five years or 20,000 hours,with a salvage value of $75,000).During the machine's five-year life its hourly usage was: 3,000; 4,000; 5,000; 5,000; and 3,000 hours.

_______________________ depreciation recognizes equal amounts of annual depreciation over the life of an asset.

The formula for calculating total asset turnover is _______________________________________.

Abbott Industries operates a mineral deposit with an estimated 500,000 tons of available ore.The mineral deposit was purchased for $750,000,and no salvage value is expected.A total of 100,000 tons are mined and sold during the year.Assuming the company uses a contra asset account,how would it record this transaction?

The most frequently used method of depreciation is the straight-line method.

On July 1 of the current year,a company purchased and placed in service a machine with a cost of $240,000.The company estimated the machine's useful life to be four years or 60,000 units of output with an estimated salvage value of $60,000.During the current year,15,000 units were produced. Prepare the necessary December 31 adjusting journal entry to record depreciation for the current year assuming the company uses: a.The straight-line method of depreciation. b.The units-of-production method of depreciation. c.The double-declining balance method of depreciation.

Acme Company has a total asset turnover of 1.25 for the current period.What are net sales given that average total assets are $40,000?

The three main factors in computing depreciation are: (1) ____________________, (2) ____________________, (3) ___________________.

The total depreciation expense over an asset's useful life will be identical across all methods of depreciation.

Depreciation measures the actual decline in market value of an asset.

During the current year,a company exchanged an old truck costing $58,000 with accumulated depreciation of $52,000 for a new truck.The new truck had a cash price of $80,000 and the company received a $16,000 trade-in allowance on the old truck with the balance of $64,000 paid in cash.Prepare the journal entry to record the exchange.

Why is the useful life of a plant asset so difficult to predict?