Exam 8: Accounting for Long-Term Operational Assets

Banks Company recognized $3,000 of depreciation expense on a delivery van.

Using double-declining balance depreciation, determine the amount of depreciation expense and the amount of accumulated depreciation that would appear on the December 31, 2015 financial statements.

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

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 2013, 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 2013. Based on this information, how much net income would Monroe report in 2013?

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.

On January 1, 2013 Brewer Company paid $14,000 cash to extend the useful life of a machine. Which of the following general journal entries would be required to recognize this expenditure?

Give an example of an intangible asset with an identifiable useful life.

On January 1, 2013, Innovative Manufacturing Company purchased equipment with a list price of $22,000 with a 5% cash discount. A total of $1,000 was paid for installation and testing. During the first year, Innovative paid $1,500 for insurance on the equipment and another $550 for routine maintenance and repairs. Innovative uses the units-of-production method of depreciation. Useful life is estimated at 100,000 units, and estimated salvage value is $2,000. During 2013, the equipment produced 13,000 units. What is closest to the amount of depreciation for the year?

Which method of depreciation is used by most U. S. companies for financial reporting purposes?

If the original expected life remained the same (i.e., 5-years), but at the beginning of 2016, the salvage value was revised to $4,000, the annual depreciation expense for each of the remaining years would be:

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

On January 2, 2013, Preston Corporation purchased a delivery truck for $46,000. The estimated useful life of the truck is 5 years, with an estimated salvage value of $8,000. The truck is expected to be driven 200,000 miles during its useful life. Required: a) If Preston uses double-declining balance depreciation, what is the amount of depreciation for 2014? What is the balance of the accumulated depreciation account at the end of 2014 after adjusting entries have been made? b) Refer to part a. Assume Preston used DDB depreciation and sold the truck at the beginning of 2015 for $18,000. What is the amount of the gain or loss on the sale of the delivery van? c) Prepare the journal entry to record the sale in part (b). d) Assume that Preston used units-of-production depreciation, instead of the DDB in part a. The delivery van was driven 50,000 miles the first year and 40,000 miles the second year. What is the amount of depreciation expense for 2013 and for 2014? What is the book value of the van at the end of 2014?

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

The Gray Company purchased equipment on account on January 1, 2013. Show how the purchase affected the financial statements of 2013

Clarkson Company paid cash to purchase equipment on January 1, 2013. Select the answer that shows how the recognition of depreciation expense in 2014 would affect assets, liabilities, equity, net income, and cash flow (+ means increase, - decrease, and NA not affected).

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

On January 1, 2013 Ballard Company spent $6,000 on an asset to improve its quality. The asset had been purchased on January 1, 2012 for $26,000. The asset had a $2,000 salvage value and a 6-year life. Ballard uses straight-line depreciation. What would be the book value of the asset on January 1, 2016?

Explain the meaning of the terms "tangible" and "intangible" and discuss how these terms are used in describing assets.

Tangible assets include land, equipment, and goodwill.

The Byer Company purchased the Cellar Company for $550,000 cash. Cellar's assets had been appraised at $560,000. At the time of sale Cellar's accounting records showed total assets of $490,000, liabilities of $80,000 and equity of $410,000. How would the purchase affect Byer's financial statements?