Exam 9: Fixed Assets and Intangible Assets

The cost of a patent with a remaining legal life of 10 years and an estimated useful life of 7 years is amortized over 10 years.

Which of the following should be included in the acquisition cost of a piece of equipment?

When cities give land or buildings to a company to locate in the community, no entry is made since there is no cost to the company.

Which of the following is true?

An asset was purchased for $120,000 on January 1, 2010 and originally estimated to have a useful life of 10 years with a residual value of $10,000. At the beginning of 2012, it was determined that the remaining useful life of the asset was only 4 years with a residual value of $2,000. Calculate the 2012 depreciation expense using the revised amounts and straight line method.

Which of the following is included in the cost of constructing a building?

Standby equipment held for use in the event of a breakdown of regular equipment is reported as property, plant, and equipment on the balance sheet.

Clanton Company engaged in the following transactions during 2011. Record each in the general journal below: 1) On January 3, 2011, Clanton purchased a copyright from Dalton Company with a cost of $250,000 with a remaining useful life of 25 years. 2) On January 10, 2011, Clanton purchased a trademark from Felton Company with a cost of $700,000. 3) On July 1, 2011, Clanton purchased a patent from Garrison Company at a cost of $80,000. The remaining legal life of the patent is 15 years and the expected useful life is 11 years. 4) On July 2, 2011, Clanton paid $30,000 in legal fees to defend the patent protection purchased on July 1, 2011. 5) Recorded the appropriate amortization for the intangible assets for 2011. 6) Clanton Company includes an asset in its ledger recorded when Clanton purchased a computer service business at a price in excess of the fair value of the assets of the company in the amount of $400,000. At December 31, 2011, $100,000 of this asset has become impaired.

The entry to record the disposal of fixed assets will include a credit to accumulated depreciation.

A machine costing $85,000 with a 5-year life and $5,000 residual value was purchased January 2, 2011. Compute depreciation for each of the five years, using the declining-balance method at twice the straight-line rate.

A copy machine acquired on March 1, 2011 with a cost of $705 has an estimated useful life of 4 years. Assuming that it will have a residual value of $125, determine the depreciation for the first year by the double-declining-balance method.

Land acquired so it can be resold in the future is listed in the balance sheet as a(n)

Equipment purchased at the beginning of the fiscal year for $360,000 is expected to have a useful life of 5 years, or 14,000 operating hours, and a residual value of $10,000. Compute the depreciation for the first and second years of use by each of the following methods: (a)straight-line (b)unit s-of-production (1,200 hours first year; 2,250 hours second year) (c)declining-balance at twice the straight-line rate (Round the answer to the nearest dollar.)

Convert each of the following estimates of useful life to a straight-line depreciation rate, stated as a percentage. (1)2 years (2)8 years (3)10 years (4)20 years (5)25 years (6)40 years (7)50 years

Expenditures that increase operating efficiency or capacity for the remaining useful life of a fixed asset are betterments.

When minor errors occur in the estimates used in the determination of depreciation, the amounts recorded for depreciation expense in the past should be corrected.

When a company exchanges machinery and receives a trade-in allowance less than the book value, this transaction would be recorded with the following entry:

For income tax purposes most companies use an accelerated deprecation method called double declining balance.

Falcon Company acquired an adjacent lot to construct a new warehouse, paying $30,000 and giving a short-term note for $370,000. Legal fees paid were $11,425, delinquent taxes assessed were $12,000, and fees paid to remove an old building from the land were $18,500. Materials salvaged from the demolition of the building were sold for $4,500. A contractor was paid $910,000 to construct a new warehouse. Determine the cost of the land to be reported on the balance sheet and show your work.

A capital lease is accounted for as if the asset has been purchased.