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Exam 8: Reporting and Analyzing Long-Term Assets

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Question 71

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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 journal entry to record the first year's depreciation is:

A) Debit Depreciation Expense $2,143,credit Accumulated Depreciation $2,143.
B) Debit Depreciation Expense $2,000,credit Office Equipment $2,000.
C) Debit Office Equipment $2,000,credit Accumulated Depreciation $2,000.
D) Debit Accumulated Depreciation $2,143; credit Office Equipment $2,143.
E) Debit Depreciation Expense $2,000,credit Accumulated Depreciation $2,000.

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

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Question 72

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A company made the following expenditures in connection with the construction of a new building: Prepare a schedule showing the amounts to be recorded as Land,Buildings,and Machinery.

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Question 73

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Intangible assets are nonphysical assets used in operations that confer on their owners' long-term rights,privileges,or competitive advantages.

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 straight-line method.

The cost of land would not include:

Salvage value is:

The Modified Accelerated Cost Recovery System (MACRS)is part of the U.S.federal income tax laws and may be used for financial reporting.

A company purchased land on which to construct a new building for a cost of $350,000.Additional costs incurred were: Real estate broker's commissions………………………….$24,500 Legal fees incurred in purchase of the real estate………… 1,500 Landscaping………………………………………………..8,000 Cost to remove old house located on land…………… 3,000 Proceeds from selling materials salvaged from old house 1,000 What total dollar amount should be charged to Land and what amount should be charged to Building or other accounts?

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?

Which of the following statements regarding increases in the value of plant assets under U.S.GAAP and IFRS is true?

McClintock Co.had the following transactions involving plant assets during Year 1.Unless otherwise indicated,all transactions were for cash. Prepare the general journal entries to record these transactions.

One characteristic of plant assets is that they are:

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

Plant assets can be disposed of by discarding,selling,or exchanging them.

Depreciation expense is calculated using its cost,estimates of an asset's salvage value,and an estimated useful life.

Allyn Company purchased equipment costing $55,000 on January 1,Year 1.The equipment is estimated to have a salvage value of $5,000 and an estimated useful life of 5 years.Double-declining-depreciation is used,and all depreciation has been recorded as of December 31,Year 2.If the equipment is sold on December 31,Year 2 for $15,000,the journal entry to record the sale is:

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 units-of-production method of depreciation charges a constant amount of expense for each unit produced during an asset's useful life.

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

The relevant factors in computing depreciation do not include: