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Exam 8: Accounting for Long-Term Assets

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Question 21

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Extraordinary repairs are expenditures extending the asset's useful life beyond its original estimate,and are capital expenditures because they benefit future periods.

A) True
B) False

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Question 22

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Plant assets are reported on a balance sheet at their book value (acquisition costs less accumulated depreciation),and not necessarily at fair (market)value.

A) True
B) False

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Question 23

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A company paid $320,000 for equipment that was expected to last five years and to have a salvage value of $40,000.During the third year of the equipment's life,$39,000 cash was paid for replacement parts that were expected to increase productivity by 10% each year.Prepare the journal entry to record the $39,000 cost incurred in the third year.

The useful life of a plant asset is:

Bering Rock acquires a granite quarry at a cost of $590,000,which is estimated to contain 200,000 tons of granite and is expected to take 6 years to remove.Compute the depletion expense for the first year assuming 38,000 tons were removed and sold.

The units-of-production method of depreciation charges a varying amount of expense for each period of an asset's useful life depending on its usage.

Revenue expenditures to keep an asset in good operating condition; they are necessary if an asset is to perform to expectations over its useful life are called ________.

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 second year of its useful life using the double-declining-balance method?

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 units-of-production method.

Peavey Enterprises purchased a depreciable asset for $22,000 on April 1,Year 1.The asset will be depreciated using the straight-line method over its four-year useful life.Assuming the asset's salvage value is $2,000,what will be the amount of accumulated depreciation on this asset on December 31,Year 3?

Financial accounting and tax accounting require the same recordkeeping and there should be no difference in results between the two accounting systems.

A company had average total assets of $887,000.Its gross sales were $1,090,000 and its net sales were $1,000,000.The company's total asset turnover equals:

The double-declining balance method is applied by (1)computing the asset's straight-line depreciation rate,(2)doubling it,(3)subtracting salvage value from cost,and (4)multiplying the rate times the net value.

Explain in detail how to compute each of the following depreciation methods: straight-line,units-of-production,and double-declining-balance.

On April 1,Year 1,Astor Corp.purchased and placed a plant asset in service.The following information is available regarding the plant asset: Make the necessary adjusting journal entries at December 31,Year 1,and December 31,Year 2 to record depreciation for each year under the straight-line depreciation method.

Match each of the appropriate definitions with correct term.

A company purchased property for $100,000.The property included a building,a parking lot,and land.The building was appraised at $62,000; the land at $35,000,and the parking lot at $18,000.Land should be recorded in the accounting records with an allocated cost of:

Victory Company purchases office equipment at the beginning of the year at a cost of $15,000.The machine is depreciated using the straight-line method.The machine's useful life is estimated to be 7 years with a $1,000 salvage value.The book value at the end of 7 years is:

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

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 land.