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Exam 7: Fixed Assets and Intangible Assets

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Question 1

True/False

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Fixed assets are reported at their book value on the balance sheet.

A) True
B) False

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True

Question 2

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If a company sells a fixed asset for an amount which is less than its book value, a gain must be recognized.

A) True
B) False

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Question 3

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The balance in Accumulated Depreciation account is deducted from the cost of fixed assets on the balance sheet.

You have been hired by a high-growth startup company to assist in the determination of what depreciation method to employ for financial reporting. The company's fixed assets are equally divided among buildings and high-tech equipment (heavily used in the initial years). (a)Can the company select different methods of depreciation for financial reporting? Explain. (b)Explain to company management which metho di of depreciation woutd be suit able for each type of fixed assets the company employs. Also, state why. (c)Which method of depreciation would the company choose for taxes? Explain why.

A company sold office furniture costing $16,500 with accumulated depreciation of $14,000 for $1,800 cash. The entry to record the sale would include:

To measure depreciation, all of the following must be known except:

Recording depreciation:

Which of the following is a fixed asset?

Expenditures for research and development are generally recorded as:

An equipment was purchased for $18,000. It has a useful life of 5 years and a residual value of $2,000. Determine the depreciation expense for the first year using the double-declining-balance method?

A computer equipment was acquired at the beginning of the year at a cost of $56,000 with an estimated residual value of $5,000, and an estimated useful life of 5 years. Determine the second year's depreciation expense using the straight-line method.

You are examining the financial statements of a company. You observe patent amortization expense of $1.5 million and a loss on impairment of goodwill for $25 million. Describe how the accountants arrived at these amounts. $\quad$$\quad$$\quad$ (a) Interpret any information provided by these disclosures. $\quad$$\quad$$\quad$ (b)

NBC Company purchased a patent from ABC for $144,000. At the time of purchase the patent had a remaining useful life of 10 years. Determine the patent amortization expense for the first year.

Cook Co. incurred the following costs related to the office building used in operating its sports supply company: (a)Replaced a broken window. (b)Replaced the rof that had been on the building for 23 years. (c)Serviced all the air conclitioners before summer started. (d)Replaced the air conditionerswith refrigerated air conditioners in the customer service areas. (e)Added a warehouse to the back of the building. (f)Repainted the interior walls. (g)Installed window shutters on all windows. Classify each of the costs as a capital expenditure or a revenue expenditure.

A company purchased an oil well for $25 million. It is estimated that 10 million barrels can be extracted from the well. Determine depletion expense assuming 3 million barrels are extracted and sold during the year.

A pressurized spray painter was purchased on April 1 of the fiscal year for $3,900. It has a useful life of 4 years and a residual value of $300. Determine depreciation expense for the first two years, assuming a fiscal year end of December 31 and using (a) the straight-line method and (b) the double-declining-balance method.

Which of the following intangible assets are amortized over their useful life?

On September 1, a machine was purchased for $47,000 with a useful life of 8 years, and a residual value of $3,000. What is the depreciation expense in the year of purchase under straight-line method, assuming a December 31 year-end?

Which of the following expenditures would not be included in the cost of a fixed asset?

Which of the following statement is true about intangible assets?