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Exam 9: Long-Term Assets: Fixed and Intangible

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Question 41

Multiple Choice

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Classify each of the following as: -Overhauling an engine in a large truck

A) Ordinary maintenance and repairs
B) Asset improvements
C) Extraordinary repairs

D) A) and C)
E) A) and B)

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Question 42

Multiple Choice

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When a company exchanges machinery and receives a trade-in allowance less than the book value, this transaction would be recorded with which of the following entries?

A) debit Machinery and Accumulated Depreciation; credit Machinery and Cash
B) debit Cash and Machinery; credit Accumulated Depreciation
C) debit Cash and Machinery; credit Accumulated Depreciation and Machinery
D) debit Machinery, Accumulated Depreciation, and Loss on Exchange of Machinery; credit Machinery and Cash

E) None of the above
F) A) and C)

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Question 43

Multiple Choice

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The method of determining depreciation that yields successive reductions in the periodic depreciation charge over the estimated life of the asset is the

Journalize each of the following transactions: (a) A wing costing $\$ 2,345,000$ was added to the building. A new mortgage was issued for the cost. (b) Equipment was upgraded to increase its capacity to produce widgets. The upgrade cost of $\$ 11,500$ was paid in cash. (c) A major overhaul costing $\$ 8,000$ on a machine increased the useful life by 4 years. The payment was made in cash.

Carter Co. acquired drilling rights for $18,550,000. The oil deposit is estimated at 74,200,000 gallons. During the current year, 6,000,000 gallons were drilled. Journalize the adjusting entry at December 31 to recognize the depletion expense. Journal

Fixed assets are ordinarily presented on the balance sheet

Falcon Company acquired an adjacent lot to construct a new warehouse, paying $40,000 and giving a short-term note for $410,000. Legal fees paid were $13,275, delinquent taxes assessed were $14,500, and fees paid to remove an old building from the land were $15,800. Materials salvaged from the demolition of the building were sold for $6,800. A contractor was paid $890,000 to construct the new warehouse. What is the cost of the land to be reported on the balance sheet?

When a seller allows a buyer an amount for old equipment that is traded in for new equipment of similar use, this amount is known as boot.

Classify each of the following costs associated with long-lived assets as one of the following: -Fences around land at new business location

Depreciation Expense

On April 15, Compton Co. paid $2,800 to upgrade a delivery truck and $125 for an oil change. Journalize the entries for the upgrade to delivery truck and oil change expenditures.

What would be the cost basis of a new machine with a purchase price of $109,000, with transportation costs of $12,000, installation costs of $5,000, and special acquisition fees of $6,000?

An asset was purchased for $58,000 and originally estimated to have a useful life of 10 years with a residual value of $3,000. After two years of straight-line depreciation, it was determined that the remaining useful life of the asset was only 2 years with a residual value of $2,000. (a) Determine the amount of the annual depreciation for the first two years. (b) Determine the book value at the end of Year 2. (c) Determine the depreciation expense for each of the remaining years after revision.

Classify each of the following as: -Fixing damage due to a car accident

On December 31, Strike Company traded in one of its batting cages for another one that has a cost of $500,000. Strike receives a trade-in allowance of $11,000. The old equipment had an initial cost of $215,000 and has accumulated depreciation of $185,000. Depreciation has been recorded up to the end of the year. The difference will be paid in cash. What is the amount of the gain or loss on this transaction?

The transfer to expense of the cost of intangible assets attributed to the passage of time or decline in usefulness is called amortization.

The Bacon Company acquired new machinery with a price of $15,200 by trading in similar old machinery and paying $12,700. The old machinery originally cost $9,000 and had accumulated depreciation of $5,000. In recording this transaction, Bacon Company should record

Equipment with a cost of $160,000, an estimated residual value of $40,000, and an estimated life of 15 years was depreciated by the straight-line method for 4 years. Due to obsolescence, it was determined that the remaining useful life should be shortened by 3 years and the residual value changed to zero. The depreciation expense for the current and future years is

A fixed asset with a cost of $41,000 and accumulated depreciation of $36,500 is traded for a similar asset priced at $60,000. Assuming a trade-in allowance of $3,000, the recognized loss on the trade is

The double-declining-balance depreciation method calculates depreciation each year by taking twice the straight-line rate times the book value of the asset at the beginning of each year.