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Exam 8: Accounting for Long-Term Operational Assets

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Question 51

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[The following information applies to the questions displayed below.] On January 1, Year 1, Jing Company purchased office equipment that cost $34,000 cash. The equipment was delivered under terms FOB shipping point, and transportation cost was $2,000. The equipment had a five-year useful life and a $12,000 expected salvage value. -Assuming the company uses the double-declining-balance depreciation method,what are the amounts of depreciation expense and accumulated depreciation,respectively,that would be reported in the financial statements prepared as of December 31,Year 3?

A) $0 and $24,000
B) $960 and $12,000
C) $8,640 and $23,040
D) $5,184 and $28,224

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Question 52

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Intangible assets include patents,copyrights,and franchises.

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Question 53

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Which of the following should be the main determinant for selection of the allocation method for long-term operational assets?

Jackson Incorporated purchased a truck for $36,000.The truck had a useful life of 150,000 miles over 4 years and a $6,000 salvage value.Jackson drove the truck 40,000 miles in Year 1 and 24,000 miles in Year 2.If Jackson uses the units-of-production method,what is the accumulated depreciation at the end of Year 2?

Indicate whether each of the following statements is true or false.

Which of the following statements is true concerning the modified accelerated cost recovery system (MACRS) for the recognition of depreciation expense,for tax purposes?

Depletion of a natural resource is usually calculated using the straight-line method.

Tangible assets include land,equipment,and goodwill.

At the end of the current accounting period,Ringgold Co.recorded depreciation of $15,000 on its equipment.What is the effect of this event on the company's balance sheet?

When a building is purchased simultaneously with land,the purchase price must be allocated between the building and the land.

On January 1,Year 1,Phillips Company made a basket purchase including land,a building and equipment for $380,000.The appraised values of the assets are $20,000 for the land,$340,000 for the building and $40,000 for equipment.Phillips uses the double-declining-balance method for the equipment which is estimated to have a useful life of four years and a salvage value of $5,000.What is the depreciation expense for the equipment for Year 1?

The use of estimates and revision of estimates are uncommon in financial reporting.

On January 1,Year 1,Monroe Minerals Company purchased a copper mine for $120,000,000.The mine was expected to produce 50,000 tons of copper over its useful life.During Year 1,the company extracted 6,000 tons of copper.The copper was sold for $4,500 per ton.Assume that the company incurred $8,040,000 in operating expenses during Year 1.What is the amount of net income for Year 1?

[The following information applies to the questions displayed below.] Farmer Company purchased machine on January 1, Year 1 for $82,000. The machine is estimated to have a 5-year life and a salvage value of $4,000. The company uses the straight-line method. -If the original expected life remained the same (i.e.,5-years) ,but at the beginning of Year 4,the salvage value was revised to $8,000,what is the annual depreciation expense for each of the remaining years?

On January 1,Year 1,Li Company purchased an asset that cost $80,000.The asset had an expected useful life of five years and an estimated salvage value of $16,000.Li uses the straight-line method for the recognition of depreciation expense.At the beginning of the fourth year,the company revised its estimated salvage value to $8,000.What is the amount of depreciation expense to be recognized during Year 4?

Accumulated Depreciation is reported on the income statement.

Assume that Harding uses the units-of-production method when depreciating its equipment.Harding estimates that the purchased equipment will produce 1,000,000 units over its 5-year useful life and has a salvage value of $34,000.Harding produced 265,000 units with the equipment by the end of the first year of purchase.Which amount below is closest to the amount Harding will record for depreciation expense for the equipment in the first year?

Indicate whether each of the following statements is true or false.

EFG Transportation Company uses the straight-line method to depreciate its delivery truck.Which of the following reflects how recognizing depreciation expense would affect the elements of the financial statements?

Gillock,Inc.uses MACRS for its income tax return and the straight-line method for its financial statements.On January 1,Year 1,the company purchased a long-term asset that cost $130,000 and has a $10,000 salvage value and an expected 8-year useful life.MACRS specifies a 5-year life for that asset and a depreciation rate of 20% for the first year of its life.Which of the following would the company show on its financial records?