Question 1

_____________________ depreciation uses a depreciation rate that is a multiple of the straight-line rate and applies it to an asset's beginning-of-period book value.

Accepted Answer

The answer of _____________________ depreciation uses a depreciation rate that...

Question 2

A company had a bulldozer destroyed by fire.The bulldozer originally cost $125,000.The accumulated depreciation on it was $60,000.The proceeds from the insurance company were $90,000.The company should recognize:

Accepted Answer

A) A loss of $25,000 
B) A gain of $25,000 
C) A loss of $65,000 
D) A gain of $65,000 
E) A gain of $90,000

Question 3

The historical cost principle requires that an asset be recorded at the cash or cash equivalent amount that was given in exchange for it.

Accepted Answer

A) True 
 B)False

Question 4

On December 31,2010,Stable Company sold a piece of equipment that was purchased on January 1,2006.The equipment originally cost $820,000 and has an estimated useful life of eight years.Stable uses the double declining balance method of depreciation.What is the gain/loss on the sale of equipment that Stable will recognize if the equipment was sold for $230,000?

Accepted Answer

A)  $35,409 Gain 
B) $25,000 Loss 
C) $25,000 Gain 
D) $35,408 Loss 
E) $0; no gain or loss

Question 5

If an asset is sold above its book value,the selling company records a loss.

Accepted Answer

A) True 
 B)False

Question 6

The original cost of a machine was $60,000.After $45,000 of depreciation was recorded,the machine was traded in on a new machine of like purpose priced at $75,000.A $10,500 trade-in allowance was received on the old machine and the balance of $64,500 was paid in cash.Prepare the general journal entry to record this trade-in.

Accepted Answer

The answer of The original cost of a machine was...

Question 7

A company purchased equipment valued at $825,000 on January 1.The equipment has an estimated useful life of seven years or six million units.The equipment is estimated to have a salvage value of $35,000.Assuming the units of production method of depreciation,what is the annual depreciation for the second year if .5 million units were produced?

Accepted Answer

The answer of A company purchased equipment valued at $825,000...

Question 8

Mahoney Company had the following transactions involving plant assets during 2010 and 2010.Unless otherwise indicated,all transactions were for cash.
 \(\begin{array}{|c|l|}
\hline 2009 & \
\hline \text { Jan. 2 } & \begin{array}{l}
\text { Purchased a truck for } \$ 50,000 \text {. Sales tax on the truck was } \$ 3,000 \text {, and the license } \
\text { was } \$ 250 . \text { The truck is expected to have a } \$ 4,000 \text { salvage value and a 4-year life. }
\end{array} \
\hline \text { Jan. 3 } & \begin{array}{l}
\text { Paid } \$ 1,500 \text { to have the company's logo painted on the truck. This did not change } \
\text { the truck's salvage value. }
\end{array} \
\hline \text { Dec.31 } & \text { Recorded straight-line depreciation on the truck. } \
\hline\
\hline 2010 & \
\hline \text { Jan. 5 } & \begin{array}{l}
\text { Paid } \$ 5,000 \text { to put a bigger engine in the truck. This new engine is expected to } \
\text { make the truck run more efficiently, and will increase the truck's useful life by } \
\text { one year. The salvage value remained at } \$ 4,000 .
\end{array} \
\hline \text { Mar. 1 } & \begin{array}{l}
\text { Paid } \$ 2,000 \text { to replace a broken tailgate. The tailgate was damaged when a heavy } \
\text { carton was inadvertently dropped on it. }
\end{array} \
\hline \text { Dec. 31 } & \text { Recorded straight-line depreciation on the truck. }\
\hline 
\end{array}\)
 
Prepare the general journal entries to record these transactions.

Accepted Answer

The answer of Mahoney Company had the following transactions involving...

Question 9

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.

Accepted Answer

A) True 
 B)False

Question 10

Total asset turnover is calculated by dividing:

Accepted Answer

A) Gross profit by average total assets 
B) Average total assets by gross profit 
C) Net sales by average total assets 
D) Average total assets by net sales 
E) Net assets by total assets

Question 11

Inadequacy refers to:

Accepted Answer

A) The insufficient capacity of a company's plant assets to meet the company's growing production demands 
B) An asset that is worn out 
C) An asset that is no longer useful in producing goods and services 
D) The condition where the salvage value is too small to replace the asset 
E) The condition where the asset's salvage value is less than its cost

Question 12

A company's property records revealed the following information about its plant assets:
 $$\begin{array} { | c | r | r | r | l | } 
\hline \begin{array} { c } 
\text { Machine } \
\text { No. }
\end{array} & \text { Cost } & \text { Salvage Value } & \text { Purchase Date } & \begin{array} { c } 
\text { Depreciation Method and } \
\text { Estimate Life }
\end{array} \
\hline 1 & \$ 42,000 & \$ 3,000 & 10 / 1 / 08 & \text { Straight-line (3 years) } \
\hline 2 & 86,000 & 8,600 & 7 / 1 / 08 & \begin{array} { l } 
\text { Double-declining-balance } \
\text { (5 years) }
\end{array} \
\hline
\end{array}$$ 
Calculate the depreciation expense for each machine for the year ended December 31,2010 and for the year ended December 31,2009.
Machine 1:
2009 _______________________
2010 _______________________
Machine 2:
2009 _______________________
2010 _______________________

Accepted Answer

The answer of A company's property records revealed the following...

Question 13

During the current year,a company exchanged an old truck costing $58,000 with accumulated depreciation of $52,000 for a new truck.The new truck had a cash price of $80,000 and the company received a $16,000 trade-in allowance on the old truck with the balance of $64,000 paid in cash.Prepare the journal entry to record the exchange.

Accepted Answer

The answer of During the current year,a company exchanged an...

Question 14

Match between columns
                        Premises:  An expenditure to make a plant asset more efficient or productive
 Expenditures made to keep a plant asset in normal, good operating condition
 A depreciation method that charges a varying amount to expense for each period of an asset's useful life depending on its usage
 The amount by which the company's value exceeds the value of its individual assets and liabilities
 The process of allocating the cost of natural resources to periods when they are consumed
 A change in a financial statement amount that results from new information, subsequent developments, better insight or improved judgment
 An expenditure reported on the current income statement as an expense because it does not provide a material benefit in future periods
 Certain nonphysical assets used in operations that confer on their owners long-term rights, privileges or competitive advantages
 A measure of a company's ability to use its assets to generate sales
 A method that yields larger depreciation expense during the early years of an asset's life and smaller expense in the later years

Accepted Answer

The Answer of Goodwill and Revenue expenditure and Betterment and is...

Question 15

Why is the useful life of a plant asset so difficult to predict?

Accepted Answer

The answer of Why is the useful life of a...

Question 16

A company's old machine that cost $40,000 and had accumulated depreciation of $30,000 was traded in on a new machine of like purpose having an estimated 20-year life with an invoice price of $50,000.The company also paid $43,000 cash,along with its old machine to acquire the new machine.The value of new machine should be recorded at:

Accepted Answer

A) $40,000 
B) $47,000 
C) $50,000 
D) $53,000 
E) $10,000

Question 17

A company made the following expenditures in connection with the construction of its
new building:
 \(\begin{array}{|l|r|}
\hline\text { Architect's fees for the new building } & \$ 12,000 \
\hline \text { Cash paid for land and run-down building on the land } & 300,000 \
\hline \text { Removal of old building } & 18,000 \
\hline \text { Salvage from sale of old building materials } & 4,000 \
\hline \text { Construction survey to site the new building } & 1,500 \
\hline \text { Legal fees for title search } & 3,000 \
\hline \text { Excavation for basement construction } & 25,000 \
\hline \text { Machinery purchased for operations } & 100,000 \
\hline\begin{array}{l}
\text { Storage charges on machinery because building was } \
\text { not ready when machinery was delivered }
\end{array} & 900 \
\hline \text { Freight on machinery purchased } & 1,600 \
\hline \begin{array}{l}
\text { Hauling charges to delivery machinery from } \
\text { Storage to new building }
\end{array} & 300 \
\hline \text { Construction costs of new building } & 1,000,000 \
\hline \text { Landscaping } & 20,000 \
\hline \text { Installation of machinery } & 2,500\
\hline
\end{array}\)
 
Prepare a schedule showing the amounts to be recorded as Land,Buildings and Machinery.

Accepted Answer

The answer of A company made the following expenditures in...

Question 18

Ace Company purchased a machine valued at $320,000 on August 1.The equipment has an estimated useful life of five years or 2.5 million units.The equipment is estimated to have a salvage value of $8,200.Assuming the straight-line method of depreciation,what is the amount of depreciation expense that needs to be recorded at the end of the first year if 710,000 units were produced?

Accepted Answer

A)  $64,000 
B) $76,800 
C) $62,360 
D) $25,983 
E) $106,667

Question 19

A company discarded a display case that it had originally purchased for $8,000.The case had $7,200 worth of accumulated depreciation.The company should recognize a(n):

Accepted Answer

A) $0 gain or loss 
B) $800 loss 
C) $800 gain 
D) $8,000 loss 
E) $7,200 loss

Question 20

Since goodwill is intangible,it is amortized each year using the straight-line method,the same as other intangibles are amortized.

Accepted Answer

A) True 
 B)False

Exam 8: Reporting and Analyzing Long-Term Assets

_____________________ depreciation uses a depreciation rate that is a multiple of the straight-line rate and applies it to an asset's beginning-of-period book value.

A company had a bulldozer destroyed by fire.The bulldozer originally cost $125,000.The accumulated depreciation on it was $60,000.The proceeds from the insurance company were $90,000.The company should recognize:

The historical cost principle requires that an asset be recorded at the cash or cash equivalent amount that was given in exchange for it.

If an asset is sold above its book value,the selling company records a loss.

Total asset turnover is calculated by dividing:

Inadequacy refers to:

Match each definition with its term

Why is the useful life of a plant asset so difficult to predict?

A company discarded a display case that it had originally purchased for $8,000.The case had $7,200 worth of accumulated depreciation.The company should recognize a(n) :

Since goodwill is intangible,it is amortized each year using the straight-line method,the same as other intangibles are amortized.