Exam 8: Reporting and Analyzing Long-Term Assets

Endor Fishing Company exchanged an old boat for a new one.The old boat had a cost of $260,000 and accumulated depreciation of $200,000.The new boat had an invoice price of $400,000.Endor received a trade in allowance of $100,000 on the old boat,which meant they paid $300,000 in addition to the old boat to acquire the new boat.What amount of gain or loss should be recorded on this exchange? (The exchange lacks commercial substance.)

Giant Green Company pays $3,000,000 for a tract of land with two buildings on it.It plans to demolish Building 1 and build a new store in its place.Building 2 will be a company office; it is appraised at $742,000,with a useful life of 25 years and a $75,000 salvage value.A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $400,500 that are expected to last another 18 years with no salvage value.Without the buildings and improvements,the tract of land is valued at $2,020,600.Giant Green also incurs the following additional costs: -What is the amount that should be recorded for the tract of land?

A machine originally had an estimated useful life of 5 years,but after 3 complete years it was decided that the original estimate of useful life should have been 10 years.At that point the remaining cost to be depreciated should be allocated over the remaining:

A company purchased a leasehold property for $8,400,000.The leasehold expires in 15 years.Prepare the journal entry to record the first year's amortization expense.

Depreciation:

A company discarded a display case that it had originally purchased for $8,000.The case had $7,200 worth of accumulated depreciation.The company should recognize a(n):

Coors reported net sales of $2,463 million and average total assets of $1,546 million.Its total asset turnover is equal to 1.59.

A company's annual accounting period ends on December 31.During the current year,a depreciable asset that cost $24,000 was purchased on October 1.The asset has a $1,000 estimated salvage value.The company uses straight-line depreciation and expects the asset to have a six-year life.What is the total depreciation expense for the current year?

Inadequacy refers to:

Explain the impact,if any,on depreciation when depreciation estimates change.

Revising estimates of the useful life or salvage value of a plant asset is referred to as a ____________________________________________.

On April 1,2012,SAS Corp.purchased and placed in service a plant asset.The following information is available regarding the plant asset: Make the necessary adjusting journal entries at December 31,2012,and December 31,2013,to record depreciation for each year under the following depreciation methods: a.Straight-line b.Double-declining-balance.

Accumulated depreciation represents funds set aside to buy new assets when the assets currently owned are replaced.

Many companies use accelerated depreciation in computing taxable income because:

A machine is purchased and used throughout its predicted useful life of five years.The depreciable cost equals $50,000.The company uses the straight-line method.How would the company record the adjusting entry to record the depreciation on this machine at the end of each of the years in its useful life?

The _____________________ principle requires that companies report the amount of accumulated depreciation on plant assets as well as the depreciation methods used to determine the annual depreciation expense.

Natural resources are reported on the balance sheet at cost plus accumulated depletion.

A company purchased equipment valued at $200,000 on January 1.The equipment has an estimated useful life of six years or 5 million units.The equipment is estimated to have a salvage value of $13,400. -Assuming the straight-line method of depreciation,what is the book value at the end of the second year?

On April 1 of the current year,a company traded an old machine that originally cost $32,000 and that had accumulated depreciation of $24,000 for a similar new machine that had a cash price of $40,000. a.Give the entry to record the exchange under the assumption that a $5,000 trade-in allowance was received and the balance of $35,000 was paid in cash. b.Give the entry to record the exchange under the assumption that instead of a $5,000 trade-in allowance,a $12,500 trade-in allowance was received and the balance of $27,500 was paid in cash.