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Exam 10: Long-Term Assets: Fixed and Intangible

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Question 21

True/False

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The book value of a fixed asset reported on the balance sheet represents its market value on that date.

A) True
B) False

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Question 22

Multiple Choice

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The calculation for annual depreciation using the units-of-activity method is

A) (Initial Cost/Estimated Output) × Actual Yearly Output
B) (Depreciable Cost/Yearly Output) × Estimated Output
C) Depreciable Cost/Yearly Output
D) (Depreciable Cost/Estimated Output) × Actual Yearly Output

E) A) and B)
F) A) and C)

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Question 23

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Match the intangible assets described with their proper classification (a-d) . ​ -Location of a company

Once the useful life of a depreciable asset has been estimated and the amount to be depreciated each year has been determined, the amounts cannot be changed.

Match each account name to the financial statement section (a-i) in which it would appear. -Research and Development Costs

A fixed asset with a cost of $52,000 and accumulated depreciation of $47,500 is traded for a similar asset priced at $60,000 (fair market value) in a transaction with commercial substance. Assuming a trade-in allowance of $5,000, at what cost will the new equipment be recorded in the books?

Revising depreciation estimates affects the amounts of depreciation expense recorded in past periods.

Newport Company has sales of $2,025,000 for the current year. The book value of its fixed assets at the beginning of the year was $550,000 and at the end of the year was $800,000. The fixed asset turnover ratio for Newport is

The acquisition costs of property, plant, and equipment should include all normal, reasonable and necessary costs to get the asset in place and ready for use.

The journal entry for recording payment for the short-term lease of a fixed asset would

Match each account name to the financial statement section (a-i) in which it would appear. -Land Improvements

Classify each of the following costs associated with long-lived assets as one of the following: -Cost of installing new equipment

A number of major structural repairs completed at the beginning of the current fiscal year at a cost of $1,000,000 are expected to extend the life of a building 10 years beyond the original estimate. The original cost of the building was $6,552,000, and it has been depreciated by the straight-line method for 25 years. Estimated residual value is negligible and has been ignored. The related accumulated depreciation account after the depreciation adjustment at the end of the preceding fiscal year is $4,550,000. (a)What has the amount of annual depreciation been in past years? (b)What was the original life estimate of the building? (c)To what account should the $1,000,000 be debited? (d)What is the book value of the building after the extraordinary repairs have been made? (e)What is the expected remaining life of the building after the extraordinary repairs have been made? (f)What is the amount of straight-line depreciation for the current year, assuming that the repairs were completed at the very beginning of the current year? Round to the nearest dollar.

Prior to adjustment at the end of the year, the balance in Trucks is $300,900 and the balance in Accumulated Depreciation-Trucks is $88,200. Details of the subsidiary ledger are as follows:?? Required (a)Based on the units-of-activity method, determine the depreciation rates per mile and the amount to be credited to the Accumulated depreciation section of each of the subsidiary accounts for the miles operated during the current year. (b)Journalize the entry to record depreciation for the year.

The units-of-activity depreciation method provides a good match of expenses against revenue.

All property, plant, and equipment assets are depreciated over time.

Machinery acquired at a cost of $80,000 and on which there is accumulated depreciation of $55,000 (including depreciation for the current year to date) is exchanged for similar machinery. Assume that the transaction has commercial substance. For financial reporting purposes, present entries to record the exchange of the machinery under each of the following assumptions: (a)Price of new, $120,000; trade-in allowance on old, $4,000; balance paid in cash. (b)Price of new, $120,000; trade-in allowance on old, $34,000; balance paid in cash.

Classify each of the following costs associated with long-lived assets as one of the following: -Outdoor lighting at new business location

On October 1, Sebastian Company acquired new equipment with a fair market value of $458,000. Sebastian received a trade-in allowance of $92,000 on the old equipment of a similar type and paid cash of $366,000. The following information about the old equipment is obtained from the account in the equipment ledger: Cost, $336,000; accumulated depreciation on December 31, the end of the preceding fiscal year, $220,000; annual depreciation, $20,000. Assuming the exchange has commercial substance, journalize the entries to record: (a) the current depreciation of the old equipment to the date of trade-in and (b) the exchange transaction on October 1.

It is necessary for a company to use the same depreciation method for all of its depreciable assets.