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Exam 8: Long-Term Assets

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Question 1

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_______________________ are expenditures that extend an asset's useful life beyond its original estimate.

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Question 2

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Plant assets are:

A) Current assets
B) Used in operations
C) Natural resources
D) Long-term investments
E) Intangible

F) B) and D)
G) B) and C)

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Question 3

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_____________ are the federal income tax rules for depreciating assets.

A company purchased equipment valued at $200,000 on January 1. The equipment has an estimated useful life of six years or five million units. The equipment is estimated to have a salvage value of $13,400. Assuming the double declining balance method of depreciation, what is the book value at the end of the second year if 1.5 million units were produced?

A new machine is expected to produce 600,000 units of product during its 8-year useful life. The machine cost $1,800,000 cash and it is estimated to have a $60,000 salvage value. If the machine produces 70,000 units of product during its first year, what is the depreciation for the first year as calculated by the units-of-production method?

January 2010, Giant Green Company pays $3,000,000 for a tract of land with two buildings on it. It plans to demolish Building 1 and build a new store in its place. Building 2 will be a company office; it is appraised at $742,000, with a useful life of 25 years and a $75,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $400,500 that are expected to last another 18 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $2,020,600. Giant Green also incurs the following additional costs: What is the amount that should be recorded for Building #1?

______________ is the process of systematically allocating the cost of an intangible asset to expense over its estimated useful life.

A company purchased equipment valued at $825,000 on January 1. The equipment has an estimated useful life of seven years or six million units. The equipment is estimated to have a salvage value of $35,000. Assuming the straight-line method of depreciation, what is the annual depreciation for the second year if .5 million units were produced?

On April 1, 2010, a company discarded a computer that cost $15,000 and that had a useful life of 4 years and a salvage value of $1,000. Using straight-line depreciation, the accumulated depreciation as of December 31, 2009 was $10,700. a. Prepare the journal entry to record depreciation up to the date of disposal of the computer b. Prepare the journal entry to record the disposal of the computer.

A company discarded a display case that it had originally purchased for $8,000. The case had $7,200 worth of accumulated depreciation. The company should recognize a(n) :

When a company constructs a building, the cost of the building includes materials and labor, design fees, building permits and insurance during construction.

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 company purchased equipment valued at $200,000 on January 1. The equipment has an estimated useful life of six years or five million units. The equipment is estimated to have a salvage value of $13,400. Assuming the straight-line method of depreciation, what is the annual depreciation for the second year if 1.5 million units were produced?

A company sold for $40,000 cash a machine that originally cost $90,000. 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?

A company purchased a machine on January 1 of the current year for $750,000. Calculate the annual depreciation expense for each year of the machine's life (estimated at 5 years or 20,000 hours, with a salvage value of $75,000). During the machine's 5-year life its hourly usage was: 3,000; 4,000; 5,000; 5,000; and 3,000 hours. $\begin{array} { | c | l | l | l | } \hline \text { Year } & \text { Straight-Line } & \begin{array} { c } \text { Units-of- } \\\text { Production }\end{array} & \begin{array} { c } \text { Double- } \\\text { Declining- } \\\text { Balance }\end{array} \\\hline \text { Year 1 } & \$ & \$ & \$ \\\hline \text { Year 2 } & & & \\\hline \text { Year 3 } & & & \\\hline \text { Year 4 } & & & \\\hline \text { Year 5 } & & & \\\hline \text { Totals } & & & \\\hline\end{array}$

Another name for a capital expenditure is:

_____________________ refers to the insufficient capacity of a company's plant asset to meet the company's productive demands.

A company purchased equipment valued at $825,000 on January 1. The equipment has an estimated useful life of seven years or six million units. The equipment is estimated to have a salvage value of $35,000. Assuming the units of production method of depreciation, what is the annual depreciation for the second year if .5 million units were produced?

A company's annual accounting period ends on December 31. During the current year a depreciable asset which cost $24,000 was purchased on October 1. The asset has a $1,000 estimated salvage value. The company uses straight-line depreciation and expects the asset to have a 6-year life. What is the total depreciation expense for the current year?

If an asset is sold above its book value, the selling company records a loss.