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Exam 8: Reporting and Analyzing Long-Term Assets

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Question 71

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The depreciation method that charges the same amount of expense to each period of the asset's useful life is called:

A) Accelerated depreciation.
B) Declining-balance depreciation.
C) Straight-line depreciation.
D) Units-of-production depreciation.
E) Modified accelerated cost recovery system (MACRS) depreciation.

F) B) and E)
G) A) and B)

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Question 72

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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.

A) True
B) False

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Question 73

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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 if the equipment was sold for $22,000 cash.

When a company constructs a building, the cost of the building includes materials and labor but not design fees, building permits, or insurance during construction.

Holding a copyright:

Extraordinary repairs are expenditures extending the asset's useful life beyond its original estimate, and are capital expenditures because they benefit future periods.

Salvage value is:

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

On April 1, Year 1, Astor Corp. purchased and placed a plant asset in service. The following information is available regarding the plant asset: Make the necessary adjusting journal entries at December 31, Year 1, and December 31, Year 2 to record depreciation for each year under the straight-line depreciation method.

A change in an accounting estimate is:

The Oberon Company purchased a delivery truck for $95,000 on January 2. The truck was estimated to have a $3,000 salvage value and a 4 year life. The truck was depreciated using the straight-line method. At the beginning of the third year, it was obvious that the truck's total useful life would be 6 years rather than 4, and the salvage at the end of the 6^th year would be $1,500. Determine the depreciation expense for the truck for the 6 years of its life.

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

In Year one, McClintock Co. acquired a truck that cost $75,500 with an estimated $14,000 salvage value and 4 year estimated useful life. Depreciation in the first year was $15,375. McClintock had the following transactions involving plant assets during Year 2. Unless otherwise indicated, all transactions were for cash. Prepare the general journal entries to record these transactions.

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. What journal entry would be needed to record the machines' first year depreciation under the units-of-production method?

Since goodwill is an intangible, it is amortized each year using the straight-line method, the same as other intangibles are amortized.

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:

The purchase of a property that included land, building, and related improvements is called a lump-sum or basket purchase.

A ____________________________ results from revising estimates of the useful life or salvage value of a plant asset.

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.

A company's property records revealed the following information about one of its plant assets: Calculate the depreciation expense in Year 1 and Year 2 for the year ended December 31. Year 1 ______________________ Year 2 _______________________