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Exam 8: Accounting for Long-Term Assets

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Question 1

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Asset turnover is computed by dividing net sales by average total assets.

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Question 2

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Salvage value is:

A) Not a factor relevant to determining depletion.
B) A factor relevant to amortizing an intangible asset with an indefinite life.
C) An estimate of the asset's value at the end of its benefit period.
D) A factor relevant to determining depreciation under MACRS.
E) A factor relevant to determining an asset's useful life.

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A leasehold refers to the rights the lessor grants to the lessee under the terms of the lease.

The straight-line depreciation method results in consistent depreciation expense.

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 purchased land on which to construct a new building for a cost of $350,000.Additional costs incurred were: Real estate broker's commissions………………………….$24,500 Legal fees incurred in purchase of the real estate………… 1,500 Landscaping………………………………………………..8,000 Cost to remove old house located on land…………… 3,000 Proceeds from selling materials salvaged from old house 1,000 What total dollar amount should be charged to Land and what amount should be charged to Building or other accounts?

The cost of an intangible asset is systematically allocated to depreciation expense over its estimated useful life.

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

To capitalize an expenditure is to:

Martin Company purchases a machine at the beginning of the year at a cost of $60,000.The machine is depreciated using the double-declining-balance method.The machine's useful life is estimated to be 4 years with a $5,000 salvage value. -The machine's book value at the end of year 3 is:

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

Total asset turnover is used to evaluate:

A machine originally had an estimated useful life of 6 years,but after 4 complete years,it was decided that the original estimate of useful life should have been 10 years.At that point the remaining cost to be depreciated should be allocated over the remaining:

Natural resources are:

Which of the following is an example of an extraordinary repair?

Explain how to calculate total asset turnover.Describe what it reveals about a company's financial condition,whether a higher or lower ratio is desirable,and how it is best applied for comparative purposes.

The Modified Accelerated Cost Recovery System (MACRS)is part of the U.S.federal income tax laws and may be used for financial reporting.

The specific meaning of goodwill in accounting is:

A company purchased land with a building for a lump-sum cost of $2,570,000 ($500,000 paid in cash and the balance on a long-term note).It was estimated that the land and building had market values of $600,000 and $2,400,000,respectively. Determine the cost to be apportioned to the land and to the building and prepare the journal entry to record the acquisition.

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000.The machine is depreciated using the double-declining-balance method. -The machine's useful life is estimated to be 5 years with a $4,000 salvage value.The machine's book value at the end of year 2 is: