Exam 8: Reporting and Analyzing Long-Term Assets

_____________________ 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 had a bulldozer destroyed by fire.The bulldozer originally cost $125,000.The accumulated depreciation on it was $60,000.The proceeds from the insurance company were $90,000.The company should recognize:

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

On December 31,2010,Stable Company sold a piece of equipment that was purchased on January 1,2006.The equipment originally cost $820,000 and has an estimated useful life of eight years.Stable uses the double declining balance method of depreciation.What is the gain/loss on the sale of equipment that Stable will recognize if the equipment was sold for $230,000?

If an asset is sold above its book value,the selling company records a loss.

The original cost of a machine was $60,000.After $45,000 of depreciation was recorded,the machine was traded in on a new machine of like purpose priced at $75,000.A $10,500 trade-in allowance was received on the old machine and the balance of $64,500 was paid in cash.Prepare the general journal entry to record this trade-in.

A company purchased equipment valued at $825,000 on January 1.The equipment has an estimated useful life of seven years or six million units.The equipment is estimated to have a salvage value of $35,000.Assuming the units of production method of depreciation,what is the annual depreciation for the second year if .5 million units were produced?

Mahoney Company had the following transactions involving plant assets during 2010 and 2010.Unless otherwise indicated,all transactions were for cash. 2009 Jan. 2 Purchased a truck for \ 50,000 . Sales tax on the truck was \ 3,000 , and the license was \ 250. The truck is expected to have a \ 4,000 salvage value and a 4-year life. Jan. 3 Paid \ 1,500 to have the company's logo painted on the truck. This did not change the truck's salvage value. Dec.31 Recorded straight-line depreciation on the truck. 2010 Jan. 5 Paid \ 5,000 to put a bigger engine in the truck. This new engine is expected to make the truck run more efficiently, and will increase the truck's useful life by one year. The salvage value remained at \ 4,000. Mar. 1 Paid \ 2,000 to replace a broken tailgate. The tailgate was damaged when a heavy carton was inadvertently dropped on it. Dec. 31 Recorded straight-line depreciation on the truck. Prepare the general journal entries to record these transactions.

When the usefulness of plant assets used to extract natural resources is directly related to the depletion of a natural resource,their costs are depreciated using the units-of-production method of depreciation,as long as the assets will not be moved to and used at another site when extraction of the natural resources is complete.

Total asset turnover is calculated by dividing:

Inadequacy refers to:

A company's property records revealed the following information about its plant assets: Machine No. Cost Salvage Value Purchase Date Depreciation Method and Estimate Life 1 \ 42,000 \ 3,000 10/1/08 Straight-line (3 years) 2 86,000 8,600 7/1/08 Double-declining-balance (5 years) Calculate the depreciation expense for each machine for the year ended December 31,2010 and for the year ended December 31,2009. Machine 1: 2009 _______________________ 2010 _______________________ Machine 2: 2009 _______________________ 2010 _______________________

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?

A company's old machine that 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:

A company made the following expenditures in connection with the construction of its new building: Architect's fees for the new building \ 12,000 Cash paid for land and run-down building on the land 300,000 Removal of old building 18,000 Salvage from sale of old building materials 4,000 Construction survey to site the new building 1,500 Legal fees for title search 3,000 Excavation for basement construction 25,000 Machinery purchased for operations 100,000 Storage charges on machinery because building was not ready when machinery was delivered 900 Freight on machinery purchased 1,600 Hauling charges to delivery machinery from Storage to new building 300 Construction costs of new building 1,000,000 Landscaping 20,000 Installation of machinery 2,500 Prepare a schedule showing the amounts to be recorded as Land,Buildings and Machinery.

Ace Company purchased a machine valued at $320,000 on August 1.The equipment has an estimated useful life of five years or 2.5 million units.The equipment is estimated to have a salvage value of $8,200.Assuming the straight-line method of depreciation,what is the amount of depreciation expense that needs to be recorded at the end of the first year if 710,000 units were produced?

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):

Since goodwill is intangible,it is amortized each year using the straight-line method,the same as other intangibles are amortized.