Exam 8: Reporting and Analyzing Long-Term Assets

__________________ is an estimate of an asset's value at the end of its benefit period (or useful life).

The depreciation method that charges a varying amount to expense for each period of an asset's useful life depending on its usage is ________________________________.

McClintock Co. had the following transactions involving plant assets during Year 1. Unless otherwise indicated, all transactions were for cash. Prepare the general journal entries to record these transactions.

When the usefulness of plant assets used to extract natural resources is directly related to the depletion of a natural resource, their costs are depreciated using the units-of-production method of depreciation, as long as the assets will not be moved to and used at another site when extraction of the natural resources is complete.

A company purchased a tract of land for its natural resources at a cost of $1,500,000. It expects to mine 2,000,000 tons of ore from this land. The salvage value of the land is expected to be $250,000. If 150,000 tons of ore are mined during the first year, the journal entry to record the depletion is:

Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. What would be the depreciation expense for the first year of its useful life using the double-declining-balance method?

The formula to compute annual straight-line depreciation is:

A company purchased an equipment system for $325,000 on January 2. The company expects the equipment to last for eight years or 81,250 hours of operation, with no estimated salvage value. During the first year, the equipment was in operation for 8,000 hours, while in the second year, the equipment was in operation for 8,700 hours. Compute the depreciation expense relating to the equipment for Year 1 and Year 2 using the following depreciation methods: a. Straight-line. b. Double-declining-balance. c. Units-of-production.

A company's property records revealed the following information about one of its plant assets: Calculate the depreciation expense for the asset in Year 1 and Year 2 for the year ended December 31. Year 1 ______________________ Year 2 _______________________

Revenue expenditures are additional costs of plant assets that do not materially increase the assets' life or productive capabilities.

A company had net sales of $230,000 for 2015 and $288,000 for 2016. The company's average total assets for 2015 were $150,000 and $180,000 for 2016. Calculate the total asset turnover for each year and comment on the company's efficiency in the use of its assets.

A company's property records revealed the following information about its plant assets: Calculate the depreciation expense for each machine in Year 1 and Year 2 for the year ended December 31. Machine 1: Year 1 ______________________ Year 2 _______________________ Machine 2: Year 1 ______________________ Year 2 _______________________

During the current year, Beldon Co. acquired a new computer with a cash price of $12,800 by exchanging an old one on which the company received a $1,500 trade-in allowance (with the balance of $11,300 paid in cash). The old computer cost $9,000 and its accumulated depreciation was $5,500 as of the exchange date. Assuming the exchange transaction had commercial substance, prepare the journal entry to record the exchange.

Westport Company reports the following in millions: net sales of $25,300 for 2016 and $22,640 for 2015; end-of-year total assets of $14,875 for 2016 and $13,680 for 2015. Compute its total asset turnover for 2016 and assess its level if competitors average a total asset turnover of 2.0 times.

A company had net sales of $1,540,500 in 2015 and $1,495,000 in 2016. Its average assets were $810,000 for 2015 and $800,000 for 2016. (1) Calculate the total asset turnover for each year. (2) Interpret and comment on the company's efficiency in the use of its assets.

A company purchased and installed machinery on January 1 at a total cost of $93,000. Straight-line depreciation was calculated based on the assumption of a five-year life and no salvage value. The machinery was discarded on July 1 of Year four due to obsolescence. The company uses the calendar year. 1. Prepare the general journal entry to update depreciation to July 1 in year four. 2. Prepare the general journal entry to record the disposal.

The depreciation method that allocates a varying amount of a plant asset's cost to expense for each period depending on its usage is called:

On April 1 of the current year, a company traded an old machine that originally cost $32,000 and that had accumulated depreciation of $24,000 for a similar new machine that had a cash price of $40,000. 1. Prepare the entry to record the exchange under the assumption that a $5,000 trade-in allowance was received and the balance of $35,000 was paid in cash. Assume the exchange transaction had commercial substance. 2. Prepare the entry to record the exchange under the assumption that instead of a $5,000 trade-in allowance, a $12,500 trade-in allowance was received and the balance of $27,500 was paid in cash. Assume the exchange transaction lacked commercial substance.

A company's property records revealed the following information about its plant assets: Calculate the depreciation expense for each machine in Year 1 and Year 2 for the year ended December 31. Machine 1: Year 1 ______________________ Year 2 _______________________ Machine 2: Year 1 ______________________ Year 2 _______________________

Victory Company purchases office equipment at the beginning of the year at a cost of $15,000. The machine's useful life is estimated to be 7 years with a $1,000 salvage value. The journal entry to record the first year depreciation is: