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Exam 7: Long-Term Assets

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Question 71

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Using the double-declining balance method,depreciation expense for 2013 would be:

A) $22,000.
B) $13,200.
C) $14,400.
D) $24,000.Depreciation rate = 2/5 = .40.

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Question 72

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Most of the costs associated with internally developed intangible assets are recorded as intangible assets on the balance sheet. We expense most of the costs for internally developed intangible assets to the income statement as we incur them.

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Question 73

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Capitalized interest refers to interest costs we add to the asset account rather than recording as interest expense.

During 2012 and 2013,Supplies,Inc.drove the truck 15,000 and 22,000 miles,respectively,to deliver merchandise to its customers.The company originally purchased the truck at the beginning of 2012 for $175,000.If the truck has an estimated life of 10 years and 300,000 miles,with an estimated residual value of $25,000,what amount of deprecation expense should Supplies,Inc.record in 2013 using the activity method?

Land improvements are recorded separately from the land itself because,unlike land,these assets are subject to depreciation.

Fruitasia purchased land,a building,and equipment for $800,000.The estimated fair values of the land,building,and equipment are $100,000,$700,000,and $200,000,respectively.At what amount would the company record the land?

Depreciation in accounting records the decrease in value of an asset. Depreciation in accounting is the process of allocating to expense the cost of an asset over its service life.

The service life of an asset is always equal to the full life of the asset. The service life is how long the company expects to receive benefits from the asset before disposing of it.

We record a long-term asset at its cost less all expenditures necessary to get the asset ready for use. We record a long-term asset at its cost plus all expenditures necessary to get the asset ready for use.

Declining-balance depreciation will be lower than straight-line depreciation in earlier years,but higher in later years. Declining-balance depreciation will be higher than straight-line depreciation in earlier years,but lower in later years.

Berry Co.purchases a patent on January 1,2012,for $40,000 and the patent has an expected useful life of five years with no residual value.Assuming Berry Co.uses the straight-line method,what is the amortization expense for the year ended December 31,2013?

Woods Company made an ordinary repair to a delivery truck at a cost of $500.Woods' accountant debited the asset account,Equipment.Was this treatment an error,and if so,what will be the effect on the financial statements of Woods?

New World Deli exchanged land for a more suitable parcel of land to be used for a new restaurant.New World Deli reported the old land at its original cost of $85,000.According to an independent appraisal,the old land currently is worth $110,000.New World Deli paid $15,000 in cash to complete the transaction.Record the exchange.

The purchase of a new cooling system for $150,000 to upgrade an office building owned by the company would be accounted for as:

The balance sheet of Hidden Valley Farms reports total assets of $450,000 and $550,000 at the beginning and end of the year,respectively.Net income and sales for the year are $100,000 and $800,000,respectively.What is Hidden Valley's return on assets?

Straight-line,declining-balance,and activity-based depreciation all are acceptable depreciation methods for both financial reporting and tax reporting. These are acceptable methods for financial reporting,not tax reporting.Most companies use MACRS for income tax depreciation.

Which of the following would be recorded as land improvements?

Research and development costs incurred in developing a patent internally are not recorded as an intangible asset in the balance sheet,but rather are expensed directly in the income statement.

In testing for recoverability of an operational asset,an impairment loss is required if the:

Straight-line produces a lower net income than accelerated methods in the earlier years of an asset's life. Straight-line produces a higher net income than accelerated methods in the earlier years of an asset's life.