Exam 11: Long Term Assets

When an asset is sold, a gain is calculated as the difference between

Indicate whether each of the following items normally would be considered a capital expenditure (C) or a revenue expenditure (R). _____ 1. Oil change for company vehicle _____ 2. Replacement of a few roof shingles _____ 3. Cost to overhaul the heating system _____ 4. Battery replacement for company vehicle _____ 5. Painting factory walls _____ 6. Installation of expensive paneling in executive offices

Plant asset exchanges can be categorized as the exchange of similar assets and the exchange of dissimilar assets.

One argument in favor of accelerated depreciation is that repair expense is likely to be greater in later years.

The portion of a group purchase of land and a build-up for $651,000 allocated to land when the land is appraised at $170,000 and the building on the land is appraised at $510,000, is

On January 1, 2005, Town Spa Pizza purchased for $16,000 a delivery truck that will be driven an estimated 100,000 miles. The truck has an estimated useful life of ten years and an estimated residual value of $5,000. Calculate the following amounts: (a) depreciation expense for 2010, under the production method (assume that 17,000 miles were driven that year); (b) the accumulated depreciation after the truck has been used for five and one-half years, under the straight-line method; and (c) depreciation expense for 2007, under the double-declining-balance method. (Show your work.)

Which of the following costs normally is expensed in the year incurred, regardless of the extent of future benefit?

The amount of depletion of a coal mine in a year may differ from the depletion expense in the same year because

In accounting, depreciation means the decline in value of an asset.

An on-site building with a twelve-year life will be abandoned after the associated timber tract with a nine-year life is depleted. The building should be depreciated over nine years.

If the purchase of machinery is treated incorrectly as a revenue expenditure, what will be the effect on net income and total assets in the year of purchase and in the following year, and why?

Goodwill equals the excess paid for a business over the book value of the net assets purchased.

Carrying value

When disposing of equipment, the Equipment account is credited for the existing carrying value.

Land and a building on the land are purchased for $336,000. The appraised values of the land and building are $60,000 and $300,000, respectively. The cost allocated to the building should be

Which of the following would be considered a revenue expenditure?

A truck that cost $20,000 and on which $8,000 of depreciation had been recorded was disposed of for $11,600. Indicate whether a gain or loss should be recorded, and for what amount.

The cost to defend a patent successfully should be expensed in the period incurred.

Joanna purchased a land for $48,000 and paid additional $2,000 for parking lot. The entry to record the payment for the parking lot is:

A company purchases land, a building on the land, and equipment in the building all for $200,000 cash. The appraised values are $135,000, $67,500, and $22,500 for the land, building, and equipment, respectively. In the journal provided, record the entry for the purchase.(Omit explanation.)