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Exam 8: Accounting for Long-Term Assets

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Question 71

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A company purchased mining property for $1,837,500 containing an estimated 7,350,000 tons of ore.In Year 1,it mined and sold 857,000 tons of ore.Calculate the depletion expense for Year 1 and prepare the journal entry to record the depletion.

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$1,837,500/7,350,000 tons = $0.25 per to...

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Question 72

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Match each of the following terms with the appropriate definitions. -Major repairs that extend the useful life of a plant asset beyond its original estimate.

A) Salvage value
B) Book value
C) Depletion
D) Leasehold improvements
E) Extraordinary repairs
F) Inadequacy
G) Land improvements
H) Patent
I) Obsolescence
J) Copyright

K) G) and J)
L) A) and E)

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Question 73

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When originally purchased,a vehicle costing $23,000 had an estimated useful life of 8 years and an estimated salvage value of $3,000.After 4 years of straight-line depreciation,the asset's total estimated useful life was revised from 8 years to 6 years and there was no change in the estimated salvage value.The depreciation expense in year 5 equals:

Edmond reported average total assets of $9,965 million and net sales of $10,430 million.Its total asset turnover equals .96.

Match each of the following terms with the appropriate definitions. -A depreciation method that charges a varying amount to expense for each period of an asset's useful life depending on its usage.

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

Match each of the following terms with the appropriate definitions. -Certain nonphysical assets used in operations that confer long-term rights,privileges,or competitive advantages on their owners.

What is depreciation of plant assets? What are the factors necessary in computing depreciation?

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?

Obsolescence refers to the insufficient capacity of a company's plant assets to meet the company's growing productive demands.

Total asset turnover is calculated by dividing average total assets by net sales.

A new machine costing $1,800,000 cash and estimated to have a $60,000 salvage value was purchased on January 1.The machine is expected to produce 600,000 units of product during its 8-year useful life.Calculate the depreciation expense in the first year under the following independent situations: 1.The company uses the units-of-production method and the machine produces 70,000 units of product during its first year. 2.The company uses the double-declining-balance method. 3.The company uses the straight-line method.

The federal income tax rules for depreciating assets are known as ________.

Martinez owns machinery that cost $87,000 with accumulated depreciation of $40,000.The company sells the machinery for cash of $42,000.The journal entry to record the sale would include:

A company sold equipment that originally cost $100,000 for $60,000 cash.The accumulated depreciation on the equipment was $40,000.The company should recognize a:

Match each of the following terms with the appropriate definitions. -The insufficient capacity of plant assets to meet the company's productive demands.

A company purchased and installed equipment on January 1 at a total cost of $72,000.Straight-line depreciation was calculated based on the assumption of a five-year life and no salvage value.The equipment was disposed of on July 1 of the fourth year.The company uses the calendar year. 1.Prepare the general journal entry to update depreciation to July 1 in the fourth year. 2.Prepare the general journal entry to record the disposal of the equipment under each of these three independent situations: a.The equipment was sold for $22,000 cash. b.The equipment was sold for $15,000 cash. c.The equipment was totally destroyed in a fire and the insurance company settled the claim for $18,000 cash.

A copyright gives its owner the exclusive right to publish and sell a musical,literary,or artistic work during the life of the creator plus 17 years.

An asset's book value is $18,000 on December 31,Year 5.The asset has been depreciated at an annual rate of $3,000 on the straight-line method.Assuming the asset is sold on December 31,Year 5 for $15,000,the company should record:

A total asset turnover ratio of 3.5 indicates that: