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Exam 8: Accounting for Long-Term Assets

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Question 51

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A company purchased a weaving machine for $190,000.The machine has a useful life of 8 years and a residual value of $10,000.It is estimated that the machine could produce 75,000 bolts of woven fabric over its useful life.In the first year,15,000 bolts were produced.In the second year,production increased to 19,000 units. -Using the units-of-production method,what is the book value of the machine at the end of the second year?

A) $108,400.
B) $144,400.
C) $81,600.
D) $190,000.
E) $180,000.

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Question 52

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The straight-line depreciation method and the double-declining-balance depreciation method:

A) Produce the same total depreciation over an asset's useful life.
B) Produce the same depreciation expense each year.
C) Produce the same book value each year.
D) Are acceptable for tax purposes only.
E) Are the only acceptable methods of depreciation for financial reporting.

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Question 53

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The depreciation method that allocates an equal portion of the total depreciable cost for a plant asset to each unit produced is called:

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

Ordinary repairs meet all of the following criteria except:

Plant assets are used in operations and have useful lives that extend over more than one accounting period.

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 determined the truck's total useful life would be 6 years rather than 4,and the salvage at the end of the 6th year would be $1,500.Determine the depreciation expense for the truck for the 6 years of its life.

A company purchased and installed machinery on January 1 at a total cost of $93,000.Straight-line depreciation was calculated based on the assumption of a five-year life and no salvage value.The machinery was disposed of on July 1 of year four.The company uses the calendar year. 1.Prepare the general journal entry to update depreciation to July 1 in year four. 2.Prepare the general journal entry to record the sale of the machine for $27,000 cash.

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. -Depreciation expense in year 4 is:

An asset can be disposed of by all of the following except:

Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $87,000.The machine's useful life is estimated to be 5 years,or 400,000 units of product,with a $7,000 salvage value.During its second year,the machine produces 84,500 units of product. -What journal entry would be needed to record the machines' second year depreciation under the units-of-production method?

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.

________ refers to a plant asset that is no longer useful in producing goods or services with a competitive advantage because of new inventions and improvements.

A machine costing $450,000 with a 4-year life and an estimated salvage value of $30,000 is installed by Peters Company on January 1.The company estimates the machine will produce 1,050,000 units of product during its life.It actually produces the following units for the first 2 years: Year 1,260,000; Year 2,275,000.Enter the depreciation amounts for years 1 and 2 in the table below for each depreciation method.Show calculation of amounts below the table. Double

Phoenix Agency leases office space.On January 3,Phoenix incurs $65,000 to improve the leased office space.These improvements are expected to yield benefits for 8 years.Phoenix has 5 years remaining on its lease.Compute the amount of expense that should be recorded the first year related to the improvements.

Riverboat Adventures pays $310,000 plus $15,000 in closing costs to buy out a competitor.The real estate consists of land appraised at $35,000,a building appraised at $105,000,and paddleboats appraised at $210,000.Compute the cost that should be allocated to the building.

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 of the equipment under each of these three independent situations: a.The equipment was sold for $22,000 cash. b.The equipment was sold for $15,000 cash. c.The equipment was totally destroyed in a fire and the insurance company settled the claim for $18,000 cash.

Once an asset's book value equals its salvage value,depreciation stops.

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.Depreciation expense in year 2 is:

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. -Depreciation expense in year 4 is: