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Exam 8: Accounting for Long-Term Assets

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Question 31

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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 straight-line method of depreciation, what is depreciation for the second year?

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Question 32

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Total asset turnover is calculated by dividing:

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.

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

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Question 33

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The total depreciation expense over an asset's useful life will be identical across all methods of depreciation.

When an asset is purchased (or disposed of) at any 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.

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

A company purchased equipment valued at $200,000 on January 1. The equipment has an estimated useful life of six years or 5 million units. The equipment is estimated to have a salvage value of $13,400. Assuming the straight-line method of depreciation, what is the depreciation for the second year?

A company purchased equipment valued at $200,000 on January 1. The equipment has an estimated useful life of six years or 5 million units. The equipment is estimated to have a salvage value of $13,400. Assuming the straight-line method of depreciation, what is the book value at the end of the second year?

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.

Revenue expenditures:

A company entered into the following transactions concerning its computer system: On January 1, 2012 purchased a computer system that cost $1,480,000. The estimated useful life of the computer is 3 years and salvage value is $40,000. Straight-line depreciation is to be used. On January 1, 2013 the company determined that the estimated useful life of the computer would be 4 years instead of 3 years. The estimated salvage value will only be $10,000. a. Prepare the journal entry to record depreciation expense for 2012. b. Prepare the journal entry to record depreciation expense for 2013.

Amortization is the process of allocating the cost of natural resources to periods when they are consumed.

Match the following definitions to their terms

An ore deposit costing $800,000 is expected to produce 1,600,000 tons of ore. A total of 70,000 tons are mined and sold in the current year. The depletion expense for the current year is $35,000.

Land improvements are:

The going-concern principle supports the reporting of plant assets at book value rather than market value.

On September 30 of the current year, a company acquired and placed in service a machine at a cost of $700,000. It has been estimated that the machine has a service life of five years and a salvage value of $40,000. Using the double-declining-balance method of depreciation, prepare a schedule showing depreciation amounts for the current year and the next four years (round answers to the nearest dollar). The company closes its books on December 31 of each year.

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.

A company purchased a machine for $970,000. The machine has a useful life of 12 years and a residual value of $4,500. It is estimated that the machine could produce 1,000,000 units over its useful life. In the first year, 200,000 units were produced. In the second year, production increased to 300,000 units. Using the units-of-production method, what is the book value of this asset at the end of the second year of operations?

A company purchased a plant asset for $45,000. The asset has an estimated salvage value of $6,000 and an estimated useful life of 10 years. The annual depreciation expense using the straight-line method is equal to $3,900 per year.

Mahoney Company had the following transactions involving plant assets during 2012 and 2013. Unless otherwise indicated, all transactions were for cash. Prepare the general journal entries to record these transactions.