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Exam 8: Accounting for Long-Term Assets

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Question 121

True/False

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Natural resources may be reported under either plant assets or their own separate category on the balance sheet.

A) True
B) False

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Question 122

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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 book value of the asset at the end of the first year of its useful life using the double-declining-balance method?

A) $680.
B) $2,320.
C) $2,720.
D) $600.
E) $300.

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

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Question 123

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Mohr Company purchases a machine at the beginning of the year at a cost of $24,000.The machine is depreciated using the straight-line method.The machine's useful life is estimated to be 5 years with a $4,000 salvage value. -Depreciation expense in year 2 is:

A company purchased mining property for $4,875,000 containing an estimated 15,000,000 tons of ore.In Year 1,it mined 689,000 tons of ore and in Year 2,it mined 935,000 tons.Calculate the depletion expense for Year 1 and Year 2 and determine the book value of the property at the end of Year 2.

Financial accounting and tax accounting require the same recordkeeping and there should be no difference in results between the two accounting systems.

Fortune Drilling Company acquires a mineral deposit at a cost of $5,900,000.It incurs additional costs of $600,000 to access the deposit,which is estimated to contain 2,000,000 tons and is expected to take 5 years to extract. -Compute the depletion expense for the first year assuming 418,000 tons were mined.

Duncan reported net sales of $2,523 million and average total assets of $1,476 million.Its total asset turnover equals 1.71.

A company purchased equipment valued at $66,000.It traded in old equipment for a $9,000 trade-in allowance and the company paid $57,000 cash with the trade-in.The old equipment cost $44,000 and had accumulated depreciation of $36,000.This transaction has commercial substance.What is the recorded value of the new equipment?

A company's property records revealed the following information about one of its plant assets: $\begin{array} { | c | c | c | c | c | } \hline \text { Cost } & \begin{array} { c } \text { Salvage } \\\text { Value }\end{array} & \begin{array} { c } \text { Purchase } \\\text { Date }\end{array} & \begin{array} { c } \text { Estimated } \\\text { Life }\end{array} & \text { Depreciation Method } \\\hline \$ 450,000 & \$ 30,000 & 10 / 01 & 7 \text { years } & \text { Straight-line } \\\hline\end{array}$ Calculate the depreciation expense for the asset in Year 1 and Year 2 for the year ended December 31. Year 1 $\underline{\quad\quad\quad\quad}$ $\quad$ $\quad$ Year 2 $\underline{\quad\quad\quad\quad}$

Martin Company purchases a machine at the beginning of the year at a cost of $60,000.The machine is depreciated using the straight-line method.The machine's useful life is estimated to be 4 years with a $5,000 salvage value. -The book value of the machine at the end of year 4 is:

A company used straight-line depreciation for an item of equipment that cost $12,000,had a salvage value of $2,000 and a five-year useful life.After depreciating the asset for three complete years,the salvage value was reduced to $1,200 but its total useful life remained the same.Determine the amount of depreciation to be charged against the equipment during each of the remaining years of its useful life:

Salvage value is:

An asset's book value is $36,000 on January 1,Year 6.The asset is being depreciated $500 per month using the straight-line method.Assuming the asset is sold on July 1,Year 7 for $25,000,the company should record:

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 accumulated depreciation at the end of the second year of its useful life using the double-declining-balance method?

A company had net sales of $1,540,500 in 2015 and $1,495,000 in 2016.Its average assets were $810,000 for 2015 and $800,000 for 2016.(1)Calculate the total asset turnover for each year.(2)Interpret and comment on the company's efficiency in the use of its assets.

The book value of an asset when using double-declining-balance depreciation is always greater than the book value from using straight-line depreciation,except at the beginning and the end of the asset's useful life,when it is the same.

Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000.The machine's useful life is estimated to be 5 years,or 300,000 units of product,with a $15,000 salvage value.During its first year,the machine produces 64,500 units of product. -Determine the machines' first year depreciation under the double-declining-balance method.

Identify the balance sheet classification of each of the following assets by placing an X in the correct classification: Plant Assets,Natural Resources,or Intangibles. $\begin{array} { | l | l | l | l | } \hline & \text { Plant assets } & \begin{array} { c } \text { Natural } \\\text { Resources }\end{array} & \begin{array} { c } \text { Intangible } \\\text { Assets }\end{array} \\\hline \text { a. Trademark } & & & \\\hline \text { b. Oil field } & & & \\\hline \text { c. Gold mine } & & & \\\hline \text { d. } \text {Fuilding } & & & \\\hline \text { f. Timberland } & & & \\\hline \text { g. Patent } & & & \\\hline \text { h. Land } & & & \\\hline \text {i. Copyright } & & & \\\hline\end{array}$

Match each of the following terms with the appropriate definitions. -An exclusive right granted to its owner to manufacture and sell an item,or to use a process,for 20 years.

A machine had an original cost of $60,000.After $45,000 of depreciation was recorded,the machine was traded in on a new machine 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.This transaction has commercial substance.Prepare the general journal entry to record this trade-in.