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Exam 8: Reporting and Analyzing Long-Term Assets

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Question 61

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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:

A) 2 years.
B) 4 years.
C) 6 years.
D) 16 years.
E) 10 years.

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Question 62

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Gain or loss on the disposal of assets is determined by comparing the disposed asset's book value to the market value of any assets received.

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Question 63

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On April 1 of the current year, a company disposed of a truck that had cost $20,000. The truck had a salvage value of $2,000, and a useful life of 5 years. The accounting records showed accumulated depreciation for this truck of $8,100 as of April 1 of the current year. The asset was discarded after an accident, and $10,500 cash was received from an insurance claim. Prepare the journal entry to record the disposal of the truck.

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

Spears Co. had net sales of $35,400 million. Its average total assets for the period were $14,700 million. Spears' total asset turnover equals:

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.

Crestfield leases office space for $7,000 per month. On January 3, the company incurs $12,000 to improve the leased office space. These improvements are expected to yield benefits for 10 years. Crestfield has 4 years remaining on its lease. What journal entry would be needed to record the expense for the first year related to the improvements?

Natural resources are:

A company purchased a weaving machine for $190,000. The machine has a useful life of 8 years and a salvage 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?

What is depreciation of plant assets? What are the factors necessary in computing depreciation?

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

A company purchased a cooling system on January 2 for $225,000. The system had an estimated useful life of 15 years. On January 3 of the thirteenth year, the company completed a renovation of the system at a cost of $33,000 and now expects the system to be more efficient and last 8 years beyond the original estimate. The company uses the straight-line method of depreciation. (a) Prepare the journal entry at January 3, to record the renovation of the cooling system. (b) Prepare the journal entry at December 31, to record the revised depreciation for the thirteenth year.

Total asset cost plus depreciation expense equals book value.

Depreciation:

A company purchased a weaving machine for $190,000. The machine has a useful life of 8 years and a salvage 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 amount of depreciation expense that should be recorded for the second year?

A company sold a machine that originally cost $90,000 for $28,000 cash. The accumulated depreciation on this machine was $47,000 at the time of the sale. What was the company's gain or loss on this sale?

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?

Equipment with a cost of $103,000 and accumulated depreciation of $82,000 was sold for $20,000. The journal entry to record the sale would include:

Amortization is:

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.