Exam 8: Reporting and Analyzing Long-Term Assets

A company paid $150,000,plus a 6% commission,and $4,000 in closing costs for a property.The property included land appraised at $87,500,land improvements appraised at $35,000,and a building appraised at $52,500.What should be the allocation of this property's costs in the company's accounting records?

Tyler Industries operates a mineral deposit with an estimated 1,500,000 tons of available ore.The mineral deposit was purchased for $1,500,000,and no salvage value is expected.A total of 200,000 tons are mined,but only 100,000 tons were sold during the year.How would the company record this transaction?

Cobb Corn Company purchases a large lot on which a building is located.The negotiated purchase price is $2,500,000 for the lot and the building.The company pays $71,500 in commissions and taxes.The appraisal values of each item is as follows: land $650,000,building $1,750,000,land improvements $120,000.What is the appropriate amount to be recorded in the general journal for the building?

_____________________ depreciation uses a depreciation rate that is a multiple of the straight-line rate and applies it to an asset's beginning-of-period book value.

A company sold equipment for $50,000.Total accumulated depreciation at the time of the sale was $20,000 and a loss of $10,000 was recognized on the sale.What was the original cost of the asset?

Clark Street Company purchases $50,000 in new equipment.In exchange,the company paid $38,000 cash and traded in old equipment.The old equipment originally cost $30,000 and had accumulated depreciation of $20,000 at the time of the exchange.The exchange has commercial substance.The old equipment has a trade-in allowance of $12,000.How would the company record this transaction?

The cost principle requires that an asset be recorded at the cash or cash equivalent amount that was given in exchange for it.

Explain the difference between revenue expenditures and capital expenditures and how they are recorded in the accounting system.

A company needed a new building.It found a suitable location with an existing old building on the land.The company reached an agreement to buy the land and the building for $960,000 cash.The old building was demolished to make way for the needed new building.Following is information regarding the demolition of the old building and construction of the new one: Prepare a single journal entry to record the above costs assuming all transactions are paid in cash.

Once the estimated depreciation expense for an asset is calculated:

On April 1,2013,a company disposed of equipment for $14,200 cash that had cost $35,000 on January 1,2008.The equipment had a salvage value of $5,000 and a useful life 10 years.The double-declining-balance depreciation method was used.On December 31,2012,accumulated depreciation was $20,664.Prepare a journal entry to record depreciation for 2013 up to the date of disposal of the equipment and prepare a journal entry to record the disposal of the equipment.

Define plant assets and identify the four primary issues in accounting for them.

A company's old machine,which cost $40,000 and had accumulated depreciation of $30,000,was traded in on a new machine of like purpose having an estimated 20-year life with an invoice price of $50,000.The company also paid $43,000 cash,along with its old machine to acquire the new machine.The value of new machine should be recorded at:

Most companies use accelerated depreciation for tax purposes as it reduces taxable income due to higher depreciation expense in the early years of an asset's life.

When the value of plant assets decline after acquisition,but before disposition,both GAAP and IFRS require companies to record those decreases as impairment losses.

A copyright gives its owner the exclusive right to publish and sell a musical,literary,or artistic work during the life of the creator plus 17 years.

On April 1,2013,a company discarded a computer that cost $15,000 and that had a useful life of four years and a salvage value of $1,000.Using straight-line depreciation,the accumulated depreciation as of December 31,2012,was $10,700. a.Prepare the journal entry to record depreciation up to the date of disposal of the computer b.Prepare the journal entry to record the disposal of the computer.

Revising an estimate of the useful life or salvage value of a plant asset is referred to as a change in accounting estimate and is reflected in the past,current,and future financial statements.

A leasehold:

The Weiss Company purchased a truck for $95,000 on January 2,2011.The truck was estimated to have a $3,000 salvage value and a four-year life.The truck was depreciated using the straight-line method.During 2013,it was obvious that the truck's total useful life would be six years rather than four and the salvage at the end of the sixth year would be $1,500.Determine the depreciation expense for the truck for the six years of its life.