Exam 8: Accounting for Long-Term Operational Assets

Hoover Company acquired Burgess Company for $1,200,000 cash.The fair value of Burgess's assets was $1,040,000,and the company had liabilities of $60,000.Which of the following journal entries would be used to record the purchase of Burgess Company?

[The following information applies to the questions displayed below.] On January 1, Year 1, Vanguard Company purchased a copyright for $12,000. Vanguard estimated the remaining useful life of the copyright to be 6 years. -Which of the following correctly shows the effect of Vanguard's purchase of the copyright on the elements of the financial statements?

[The following information applies to the questions displayed below.] Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,900,000. Harding paid $350,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $374,000; Building, $1,100,000 and Equipment, $726,000. -What journal entry would be used to record the purchase of the above assets?

On January 1,Year 1,Parker Company purchased an asset costing $20,000.The asset had an expected five-year life and a $2,000 salvage value.The company uses the straight-line method.What are the amounts of depreciation expense and accumulated depreciation,respectively,that will be reported in the Year 2 financial statements?

What term is used to describe the situation where the value of an intangible asset may be significantly diminished?

On January 1,Year 1 Missouri Co.purchased a truck that cost $57,000.The truck had an expected useful life of 10 years and a $6,000 salvage value.Missouri uses the double declining-balance method.What is the amount of depreciation expense recognized in Year 2?

On April 1,Year 1,Fossil Energy Company purchased an oil producing well at a cash cost of $12,000,000.It is estimated that the oil well contains 600,000 barrels of oil,of which only 500,000 can be profitably extracted.By December 31,Year 1,25,000 barrels of oil were produced and sold.What is depletion expense for Year 1 on this well?

[The following information applies to the questions displayed below.] Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,900,000. Harding paid $350,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $374,000; Building, $1,100,000 and Equipment, $726,000. -What value will be recorded for the building?

An impairment of an intangible asset decreases assets,stockholders' equity,and net income.

On January 1,Year 1,Li Company purchased an asset that cost $80,000.The asset had an expected useful life of five years and an estimated salvage value of $16,000.Li uses the straight-line method for the recognition of depreciation expense.At the beginning of the fourth year,the company revised its estimated salvage value to $8,000.What is the amount of depreciation expense to be recognized during Year 4?

In choosing a depreciation method for financial reporting,a company should use the method that most closely approximates the amount of depreciation on the tax return.

[The following information applies to the questions displayed below.] Farmer Company purchased equipment on January 1, Year 1 for $82,000. The machines are estimated to have a 5-year life and a salvage value of $4,000. The company uses the straight-line method. -If the original expected life remained the same (i.e. ,5-years),but at the beginning of Year 4,the salvage value was revised to $8,000,what is the annual depreciation expense for each of the remaining years?

When Company X purchases Company Y,Company X should record Company Y's assets at their fair value at the time of the acquisition.

A machine with a book value of $38,000 is sold for $32,000.Which of the following answers would accurately represent the effects of the sale on the elements of the financial statements?

Generally accepted accounting principles require that,when the estimated useful life of a long-term asset is changed,previously-issued financial statements should not be revised.

Which financial statement reports the amount of accumulated depreciation?

On January 1,Year 1,Dalen Company purchased office equipment that cost $3,500.The equipment had an estimated five-year useful life and an estimated salvage value of $750.The company uses the straight-line method.What is the depreciation expense shown on the income statement and the related cash flow from operating activities shown on the statement of cash flows,respectively,for Year 1?

EFG Transportation Company uses the straight-line method to depreciate its delivery truck.Which of the following reflects how recognizing depreciation expense would affect the elements of the financial statements?

The purchase of a new delivery truck for cash is an asset use transaction.

How is depreciation expense reported in the financial statements?