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Exam 8: Accounting for Long-Term Assets

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Question 121

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Ngu owns equipment that cost $93,500 with accumulated depreciation of $64,000.Ngu asks $35,000 for the equipment but sells the equipment for $33,000.Compute the amount of gain or loss on the sale.

A) $3,500 loss.
B) $5,500 gain.
C) $5,500 loss.
D) $3,000 gain.
E) $3,500 gain.

F) B) and E)
G) B) and C)

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Question 122

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Fortune Drilling Company acquires a mineral deposit at a cost of $5,900,000.It incurs additional costs of $600,000 to access the deposit,which is estimated to contain 2,000,000 tons and is expected to take 5 years to extract.Compute the depletion expense for the first year assuming 418,000 tons were mined.

A) $1,233,100.
B) $1,358,500.
C) $1,300,000.
D) $1,180,000.
E) $1,280,000.

F) A) and B)
G) D) and E)

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Question 123

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The cost of land would not include:

A company purchased mining property for $1,837,500 containing an estimated 7,350,000 tons of ore.When mining is complete,the property will have no salvage value.In Year 1,it mined and sold 857,000 tons of ore.Calculate the depletion expense for Year 1 and prepare the journal entry to record the depletion.

Capital expenditures that extend an asset's useful life beyond its original estimate are called ________.

Total asset cost plus depreciation expense equals book value.

A machine costing $75,000 is purchased on September 1,Year 1.The machine is estimated to have a salvage value of $10,000 and an estimated useful life of 4 years.Double-declining-balance depreciation is used.If the machine is sold on December 31,Year 3 for $13,000,the journal entry to record the sale will include:

Flask Company reports net sales of $4,315 million; cost of goods sold of $2,808 million; net income of $283 million; and average total assets of $2,136.Compute its total asset turnover.

Identify the balance sheet classification of each of the following assets by placing an X in the correct classification: Plant Assets,Natural Resources,or Intangibles.

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?

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.

A patent is an exclusive right granted to its owner to manufacture and sell a patented item or to use a process for 20 years.

Natural resources are assets that include standing timber,mineral deposits,and oil and gas fields.

When plant assets are purchased as a group in a single transaction for a lump-sum price,the cost of the purchase is allocated among the different types of assets acquired based on their relative market values.

The term,obsolescence,as it relates to the useful life of an asset,refers to:

Additional costs of plant assets that provide benefits extending beyond the current period; they increase or improve the type or amount of service an asset provides are treated as ________.

Capital expenditures,also called balance sheet expenditures,are additional costs of plant assets that provide benefits extending beyond the current period.

A trademark is an exclusive right granted to its owner to publish and sell a musical,literary,or artistic work during the life of the creator plus 70 years.

Depletion is:

On April 1 of the current year,a company purchased and placed in service a machine with a cost of $240,000.The company estimated the machine's useful life to be four years or 60,000 units of output with an estimated salvage value of $60,000.During the current year,12,000 units were produced. Prepare the necessary December 31 adjusting journal entry to record depreciation for the current year assuming the company uses: a.The straight-line method of depreciation b.The units-of-production method of depreciation c.The double-declining balance method of depreciation