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Exam 8: Accounting for Long-Term Assets

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Question 81

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The process of allocating the cost of a plant asset to expense in the accounting periods benefiting from its use is called depletion.

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Question 82

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Granite Company purchased a machine costing $120,000,terms 1/10,n/30.The machine was shipped FOB shipping point and freight charges were $2,000.The machine requires special mounting and wiring connections costing $10,000.When installing the machine,$1,300 in damages occurred.Compute the cost recorded for this machine assuming Granite paid within the discount period.

A) $129,800.
B) $132,100.
C) $130,800.
D) $118,800.
E) $120,100.

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Question 83

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________ is an estimate of an asset's value at the end of its useful life.

Explain the difference between revenue expenditures and capital expenditures and how they are recorded in the accounting system.

A company purchased a tract of land for its natural resources at a cost of $1,500,000.It expects to mine 2,000,000 tons of ore from this land.The salvage value of the land is expected to be $250,000.The depletion expense per ton of ore is:

Define plant assets and identify the four primary issues in accounting for them.

What are some of the variables that make a plant asset's useful life difficult to predict?

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

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. -Determine the machines' second year depreciation under the units-of-production method.

One characteristic of plant assets is that they are:

Depreciation is higher in earlier years and income is lower in the later years when using straight-line versus accelerated methods.

Westport Company reports the following in millions: net sales of $25,300 for Year 2 and $22,640 for Year 1; end-of-year total assets of $14,875 for Year 2 and $13,680 for Year 1.Compute its total asset turnover for Year 2 and assess its level if competitors average a total asset turnover of 2.0 times.

Additions to land that increase the usefulness of the land such as parking lots,fences,and lighting are not depreciated.

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.

Revenue expenditures:

Land improvements include parking lots and walkways.

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 depreciation expense for the first year of its useful life using the double-declining-balance method?

The first step in accounting for an asset disposal is to calculate the gain or loss on disposal.

It is necessary to report both the cost and the accumulated depreciation of plant assets in the financial statements.

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.