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Exam 8: Accounting for Long-Term Operational Assets

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Question 21

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On January 1,2016 Dinwiddie Company purchased a car that cost $45,000.The car had an expected useful life of 6 years and a $10,000 salvage value.Based on this information alone:

A) The total amount of depreciation expense recognized over the six year useful life will be greater under the double declining balance method than the straight-line method.
B) The amount of depreciation expense recognized in 2019 would be greater if Dinwiddie depreciates the car under the straight-line method than if the double declining balance method is used.
C) At the end of 2018,the amount in accumulated depreciation account will be less if the double declining balance method is used than it would be if the straight-line method is used.
D) None of these statements is true.

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Question 22

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Land differs from other property because it is not subject to depreciation.

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Question 23

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Dinkins Company purchased a truck that cost $46,000.The company expected to drive the truck 100,000 miles over its 5-year useful life,and the truck had an estimated salvage value of $8,000.If the truck is driven 26,000 miles in the current accounting period,what would be the amount of depreciation expense for the year?

Which of the following general journal entries shows the proper recording of an impairment loss of $15,000 for goodwill?

Why is land classified separately from other tangible long-term assets?

Name three examples of property,plant and equipment.

Explain how a business using the straight-line method would re-compute depreciation after revising the useful life estimate.

Use the following to answer questions Farmer Company purchased equipment on January 1,2015 for $82,000.The machines are estimated to have a 5-year life and a salvage value of $4,000.The company uses the straight-line depreciation method. -If the original expected life remained the same (i.e. ,5-years) ,but at the beginning of 2018,the salvage value was revised to $8,000,the annual depreciation expense for each of the remaining years would be:

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts.Enter only one letter for each element. -The Jenkins Company purchased equipment for $25,000 on January 1,2016.The equipment had an estimated useful life of four years and an estimated salvage value of $5,000.At the beginning of 2018,the equipment was sold for $8,000.Show how the sale affected the financial statements for 2018,assuming Jenkins uses straight-line depreciation.

Laramie Co.paid $800,000 for a purchase that included land,building,and office furniture.An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Land,$100,000,Building,$740,000,and Office Furniture,$160,000.Based on this information the cost that would be allocated to the land is:

When depreciation is recorded on equipment,Depreciation Expense is debited and Equipment is credited.

Use the following to answer questions Jing Company was started on January 1,2016 when it issued common stock for $50,000 cash.Also,on January 1,2016 the 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. -Using double-declining balance depreciation,determine the amount of depreciation expense and the amount of accumulated depreciation that would appear on the December 31,2018 financial statements.

On January 1,2016,Jefferson Manufacturing Company purchased equipment for $212,000.Jefferson paid $4,000 to have the machine installed.The equipment is expected to have a 5 year useful life and a salvage value of $26,000. Required: a)At what dollar amount should this equipment be recorded in Jefferson's accounting records? b)Compute depreciation expense for 2016 and 2017 using straight line depreciation. c)What is the book value at the beginning of 2018? d)Assume the equipment was sold on January 1,2018,for $135,000.Compute the amount of gain or loss from the sale. e)Prepare the journal entry to record the sale of the equipment using the information in part d).

An impairment of an intangible asset reduces the asset,stockholders' equity,and net income.

What items are included in the cost of a newly purchased building?

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 2016,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 2016.Based on this information,how much net income would Monroe report in 2016?

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

The Ernie Company acquired the Bert Company in January of 2016.Ernie's balance sheet included $700,000 of assets,$250,000 of liabilities and equity of $450,000.Ernie agrees to assume the liabilities and pay $480,000 to acquire Bert.An independent appraiser assessed the fair value of Bert's assets to be $630,000.Indicate whether each of the following statements about this transaction is true or false. _____ a)Ernie's entry to record the transaction includes a debit to the assets for $700,000. _____ b)Ernie's entry to record the transaction includes a debit to liabilities for $250,000. _____ c)Ernie will recognize $100,000 of goodwill in recording the acquisition of Bert. _____ d)It is impossible for Ernie to estimate the length of life for goodwill. _____ e)The goodwill will be amortized in the same manner as patents.

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

What is the name of the tax rule that requires six months of depreciation expense to be taken in the year of purchase of the asset and the year of disposal regardless of the purchase date?