Question 1

A company purchased a music distributor's collection of lyrics and songs for $1,425,000.The copyrights are expected to last another 30 years.Prepare the journal entry to record the amortization expense for the first year.

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Question 2

Huffington Company traded in an old delivery truck for a new one.The old truck had a cost of $75,000 and accumulated depreciation of $60,000.The new truck had an invoice price of $125,000.Huffington was given a $12,000 trade-in allowance on the old truck,which meant they paid $113,000 in addition to the old truck to acquire the new truck.What is the recorded value of the new truck?

Accepted Answer

A) $15,000 
B) $75,000 
C) $113,000 
D) $125,000 
E) $128,000

Question 3

A company purchased a rope-braiding machine for $190,000.The machine has a useful life of eight years and a residual value of $10,000.It is estimated that the machine could produce 750,000 units of climbing rope over its useful life.In the first year,105,000 units were produced.In the second year,production increased to 109,000 units.Using the units-of-production method,what is the amount of depreciation that should be recorded for the second year?

Accepted Answer

A) $25,200 
B) $26,160 
C) $26,660 
D) $27,613 
E) $53,160

Question 4

Amortization:

Accepted Answer

A) Is the systematic allocation of the cost of an intangible asset to expense over its estimated useful life. 
B) Is the process of allocating to expense the cost of a plant asset to the accounting periods benefiting from its use. 
C) Is the process of allocating the cost of natural resources to periods when they are consumed. 
D) Is an accelerated form of expensing an asset's cost. 
E) Is the same as depletion.

Question 5

______________ is the process of systematically allocating the cost of an intangible asset to expense over its estimated useful life.

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Question 6

A company traded an old forklift for a new forklift,receiving a $10,500 trade-in allowance and paying the remaining $37,200 in cash.The old forklift cost $39,000 and straight-line accumulated depreciation of $27,200 had been recorded as of the exchange date under the assumption it would last five years and have a $5,000 salvage value.
a.What was the book value of the old forklift on the date of the exchange?
b.What amount of gain or loss (indicate which) should be recognized in recording the exchange?
c.What amount should be recorded as the cost of the new forklift?

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Question 7

A company purchased equipment valued at $825,000 on January 1.The equipment has an estimated useful life of seven years or 6 million units.The equipment is estimated to have a salvage value of $35,000.Assuming the double-declining-balance method of depreciation,what is depreciation for the second year? (Express the DDB rate as a percentage and then round it to two decimal places.Round the annual depreciation amount to a whole number.)

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Question 8

On April 1,2013,a company discarded a machine that had cost $10,000 and had accumulated depreciation of $8,000 as of December 31,2012.The asset had a five-year life and no salvage value.Prepare the journal entries to record the updating of the depreciation expense and discarding of this asset.

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Question 9

On September 1,2014,Drill Far Company purchased a tract of land for $2,300,000.The land is estimated to have a salvage value or $50,000,a useful life of four years,and contain an estimated 4,234,000 tons of iron ore.The company also purchased equipment to use in the extraction process that cost $220,450.The company plans to abandon the equipment when the ore is completely mined.During 2014,the company extracted and sold 1.25 million tons of ore.What is the depletion expense recorded for 2014?

Accepted Answer

A) $575,000 
B) $679,027 
C) $664,265 
D) $562,500 
E) $600,000

Question 10

When originally purchased,a vehicle had an estimated useful life of eight years.The vehicle cost $23,000 and its estimated salvage value is $1,500.After four years of straight-line depreciation,the asset's total estimated useful life was revised from eight years to six years and there was no change in the estimated salvage value.The depreciation expense in year 5 equals:

Accepted Answer

A) $5,375.00 
B) $2,687.50 
C) $5,543.75 
D) $10,750.00 
E) $2,856.25

Question 11

Compare the different depreciation methods (straight-line,units-of-production,and double-declining-balance) with respect to the computation of depreciation per period and the total depreciation over the life of the asset.

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Question 12

Explain (in detail) how to compute each of the following depreciation methods: straight-line,units-of-production,and double-declining-balance.

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Question 13

Blanket Corporation sold equipment for cash of $40,500.Accumulated depreciation on the sale date amounted to $34,000 and a loss of $1,800 was recognized on the sale. What was the original cost of the asset?

Accepted Answer

A) $72,300 
B) $75,900 
C) $4,700 
D) $76,300 
E) $42,300

Question 14

A company sold for $40,000 cash a machine that originally cost $90,000.The accumulated depreciation on this machine was $47,000 at the time of the sale.What was the company's gain or loss on this sale?

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Question 15

How is the cost principle applied to plant asset acquisitions,including lump-sum purchases?

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Question 16

On April 1 of the current year,a company disposed of an automobile that had cost $20,000.The auto had a salvage value of $2,000 and a useful life of five years.The accounting records showed accumulated depreciation for this automobile of $8,100 as of April 1 of the current year.The asset was discarded after an accident occurred and $10,500 cash was received from an insurance claim.
Prepare the journal entry to record the disposal of the automobile.

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Question 17

A company had a building destroyed by fire.The building originally cost $650,000 and its accumulated depreciation as of the date of the fire was $300,000.The company received $400,000 cash from an insurance policy that covered the building and will use that money to help rebuild.Prepare the single journal entry to record the destruction of the building and the receipt of cash from the insurance company.

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Question 18

A machine was purchased for $37,000 and depreciated for five years on a straight-line basis under the assumption it would have a ten-year life and a $1,000 salvage value.At the beginning of the machine's sixth year it was recognized the machine had three years of remaining life instead of five and that at the end of the remaining three years its salvage value would be $1,600.What amount of depreciation should be recorded in each of the machine's remaining three years?

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Question 19

A company paid $314,000 for a machine that was expected to last five years and have a salvage value of $40,000.During the third year of the machine's life,$37,000 cash was paid for replacement parts that were expected to increase the machine's productivity by 10% each year.Prepare the journal entry to record the $37,000 cost incurred in the third year.

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Question 20

______________________ depreciation charges a varying amount to expense for each period of an asset's useful life depending on its usage.

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Exam 8: Reporting and Analyzing Long-Term Assets