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Exam 8: Reporting and Analyzing Long-Term Assets

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Question 31

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Describe the accounting for intangible assets, including their acquisition, cost allocation, and accounts involved.

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Intangible assets are recorded at acquis...

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Question 32

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The straight-line depreciation method and the double-declining-balance depreciation method:

A) Produce the same total depreciation over an asset's useful life.
B) Produce the same depreciation expense each year.
C) Produce the same book value each year.
D) Are acceptable for tax purposes only.
E) Are the only acceptable methods of depreciation for financial reporting.

F) C) and D)
G) B) and E)

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Question 33

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Total depreciation expense over an asset's useful life will be identical under all methods of depreciation.

Anderson Company sold a piece of equipment for $28,000 cash on December 31 after recording the annual depreciation on the asset. The equipment had an original cost of $97,500 and accumulated depreciation of $63,000. Prepare the general journal entry to record the sale of this asset.

The Modified Accelerated Cost Recovery System (MACRS), which is part of the U.S. federal income tax laws, may also be used for financial reporting.

_________________________ are capital expenditures that make a plant asset more productive but do not always increase an asset's life; they often involve adding a component to an asset or replacing one of its old components with a better one.

The following information is available on a depreciable asset owned by Mutual Savings Bank: The asset's book value is $70,000 on June 1, Year 3. On that date, management determines that the asset's salvage value should be $5,000 rather than the original estimate of $10,000. Based on this information, the amount of depreciation expense the company should recognize during the last six months of Year 3 would be:

A company's old machine that cost $40,000 and had accumulated depreciation of $22,000 was traded in on a new machine having an estimated 20-year life with an invoice price of $45,000. The company also paid $33,000 cash, along with its old machine to acquire the new machine. If this transaction has commercial substance, the new machine should be recorded at:

The depreciation method in which a plant asset's depreciation expense for a period is determined by applying a constant depreciation rate to the asset's beginning-of-period book value is called:

When an asset is purchased (or disposed of) at a time other than the beginning or the end of an accounting period, depreciation is recorded for part of a year so that the year of purchase or the year of disposal is charged with its share of the asset's depreciation.

Another name for a capital expenditure is:

A company purchased a plant asset for $60,000. The asset has an estimated salvage value of $4,000, and an estimated useful life of 7 years. The annual depreciation expense using the straight-line method is $4,000 per year. Depreciation Expense = (Cost - Salvage Value)/Estimated Useful Life Depreciation Expense = ($60,000 - $4,000)/7; Depreciation Expense = $8,000

A company purchased a weaving machine for $190,000. The machine has a useful life of 8 years and a salvage value of $10,000. It is estimated that the machine could produce 75,000 bolts of woven fabric over its useful life. In the first year, 15,000 bolts were produced. Using the units-of-production method, what is the amount of depreciation expense that should be recorded for the first year?

On January 1, a company purchased machinery for $75,000 that had a 6-year useful life and a salvage value of $6,000. After three years of straight-line depreciation, the company paid $8,500 cash at the beginning of the year to improve the efficiency of the machinery. The productivity of the machinery was improved without increasing its remaining useful life or changing its salvage value. Straight-line depreciation is used throughout the machinery's life. 1. Prepare the journal entry to record the $8,500 expenditure. 2. Prepare the journal entry to record depreciation expense for the fourth year.

The depreciation method that 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 is ____________________.

A company purchased property for $100,000. The property included a building, a parking lot, and land. The building was appraised at $62,000; the land at $35,000, and the parking lot at $18,000. Land should be recorded in the accounting records with an allocated cost of:

A company purchased land with a building for a lump-sum cost of $2,570,000 ($500,000 paid in cash and the balance on a long-term note). It was estimated that the land and building had market values of $600,000 and $2,400,000, respectively. Determine the cost to be apportioned to the land and to the building and prepare the journal entry to record the acquisition.

Martinez owns an asset that cost $87,000 with accumulated depreciation of $40,000. The company sells the equipment for cash of $42,000. At the time of sale, the company should record:

Plant assets are used in operations and have useful lives of more than one accounting period.

The units-of-production method of depreciation charges a varying amount of expense for each period of an asset's useful life depending on its usage.