Exam 7: Operating Assets

Fabian Woodworks This company purchased a truck at a cost of $12,000.The truck has an estimated residual value of $2,000 and an estimated life of 5 years,or 100,000 hours of operation.The truck was purchased on January 1,2012,and was used 27,000 hours in 2012 and 26,000 hours in 2013. -Refer to Fabian Woodworks.If the company uses the straight-line method of depreciation,what is the book value at December 31,2014?

Plant assets,current assets,property,plant and equipment,and fixed assets are all tangible assets.

Fernbank Farms This company purchased a semi truck at the beginning of 2011 at a cost of $100,000.The truck had an estimated life of 5 years,an estimated residual value of $20,000,and will be depreciated using the straight-line method.On January 1,2013,the company made major repairs of $30,000 to the truck that extended the life 3 years.Thus,starting with 2013,the truck has a remaining life of 5 years and a new salvage value of $8,000. -Refer to Fernbank Farms.What is the truck's book value at December 31,2013?

Depreciation is

The following costs were incurred to acquire and prepare land for a new parking lot: purchase price of land,$900,000;cost to clear the land,$40,000;cost of paving,$35,000;and cost of lighting for the parking lot,$20,000.How much should be recorded in the Land Improvements account?

____________ costs are expenditures incurred in the discovery of new knowledge and the translation of research into a design or plan for a new product

When making lending decisions,lenders generally are not interested in the company's operating assets.

You have determined that a company uses straight line depreciation.However,the depreciation expense is different than you expected it to be.What could be the reason for this difference?

Flossil Fossils Company purchased a tract of land containing coal in 2013 for $20,000,000 and then spent $30,000,000 to get a mine ready for operation.The company estimates that there will be 10,000,000 tons of coal available over the next 10 years.The land has a residual value of $500,000.During 2013,1,000,000 tons of coal were mined. A) Compute the cost of the natural resource and the depletion rate. B) Record the jounnal entry for the 2013 depletion.

Double-declining-balance depreciation is most commonly used by businesses for financial reporting purposes.

If a company's asset turnover ratio decreased from 2011 to 2012,which of the following conclusions can be made?

What impact does materiality have on the determination of how a cost related to a plant asset is reported on the financial statements?

Which of the following is an intangible asset?

On January 1,2012,a company sold a machine for $5,000 that it had used for several years.The machine cost $11,000,and had accumulated depreciation of $4,500 at the time of sale.What gain or loss will be reported on the income statement for the sale of the machine?

The accounting life of intangible assets is determined by

Assets classified as property,plant,and equipment are reported at

Falling Leaves Lawn Care This company purchased new excavating equipment at the beginning of 2012.The equipment has a cost of $37,000,an estimated life of 5 years,and an estimated residual value of $7,000.A full year's depreciation expense is to be recorded in 2012.The equipment was used 20,000 hours during 2012 and 24,000 hours during 2013.The number of expected hours over five years is 100,000. -Refer to Falling Leaves Lawn Care.By what amount would double-declining-balance depreciation exceed straight-line depreciation over the 5-year life of the equipment?

Distinguish between current assets and operating assets.

Describe the relationship between the depreciation method chosen and income taxes paid in the early years of asset life.

Goodwill can be recorded as an asset when a(n)