Exam 8: Accounting for Long-Term Operational Assets

On January 1,Year 1,the City Taxi Company purchased a new taxi cab for $36,000.The cab has an expected salvage value of $2,000.The company estimates that the cab will be driven 200,000 miles over its life.It uses the units-of-production method to determine depreciation expense.The cab was driven 45,000 miles the first year and 48,000 the second year.What is the amount of depreciation expense reported on the Year 2 income statement and the book value of the taxi at the end of Year 2,respectively?

Tyler Company purchased equipment that cost $260,000 cash on January 1,Year 1.The equipment had an expected useful life of five years and an estimated salvage value of $10,000.Tyler depreciates its assets under the straight-line method.What is the amount of depreciation expense appearing on the Year 1 income statement?

On January 1,Year 1,Monroe Minerals Company purchased a copper mine for $120,000,000.The mine was expected to produce 50,000 tons of copper over its useful life.During Year 1,the company extracted 6,000 tons of copper.The copper was sold for $4,500 per ton.Assume that the company incurred $8,040,000 in operating expenses during Year 1.What is the amount of net income for Year 1?

The term used to recognize expense for property,plant,and equipment assets is depletion.

Which of the following is considered an accelerated depreciation method?

Byrd Company experienced an accounting event that affected the elements of its financial statements as indicated below: Which of the following accounting events could have caused these effects?

A trademark is a tangible asset with an indefinite useful life.

On January 1,Year 1,XYZ Company paid $60,000 cash to purchase a truck.The truck has a $5,000 salvage value and a 4-year useful life.XYZ uses the double-declining-balance method.How much depreciation expense would XYZ report on its Year 2 income statement?

On January 1,Year 1,Dinwiddie Company purchased a car that cost $45,000.The car has an expected useful life of 5 years and a $10,000 salvage value.Which of the following statements is true?

Which of the following terms is used to identify the expense recognition associated with intangible assets?

A copyright is an intangible asset with an indefinite useful life.

Laramie Co.paid $800,000 for a purchase that included land,building,and office furniture.An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Land,$100,000,Building,$740,000,and Office Furniture,$160,000.What is the cost that should be allocated to the land?

The balance sheet of Flo's Restaurant showed total assets of $600,000,liabilities of $160,000 and stockholders' equity of $540,000.An appraiser estimated the fair value of the restaurant assets at $680,000.If Alice Company pays $770,000 cash for the restaurant,what is the amount of goodwill?

On March 1,Bartholomew Company purchased a new stamping machine with a list price of $34,000.The company paid cash for the machine;therefore,it was allowed a 5% discount.Other costs associated with the machine were: transportation costs,$550;sales tax paid,$1,360;installation costs,$450;routine maintenance during the first month of operation,$500.What is the cost of the machine?

Land differs from other property because it is not subject to depreciation.

Which of the following would be classified as a long-term operational asset?

Recognizing depreciation expense on equipment or a building is an asset use transaction.

When using the modified accelerated cost recovery system (MACRS)the highest amount of depreciation expense will be recognized in the year the asset is acquired.

The cost of natural resources includes the purchase price,as well as exploration costs and surveys.

Which of the following would not be classified as a tangible long-term asset?