Exam 9: Reporting and Analyzing Long-Lived Assets

The process of allocating to expense the cost of an asset over its useful life is called __________________ for tangible plant assets and __________________ for intangible assets.

A company purchased land for $84,000 cash. Real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Proceeds from salvage of the demolished building was $1,200. Under the historical cost principle, the cost of land would be recorded at

Sprague Associates sold office furniture for $32,000. The furniture had an original cost of $96,000 and accumulated depreciation of $48,000. Ignoring the tax effect, as a result of the sale

On July 1, 2014, Fleming Company sells machinery for $120,000. The machinery originally cost $300,000, had an estimated 5-year life and an expected salvage value of $50,000. The Accumulated Depreciation account had a balance of $175,000 on January 1, 2014, using the straight-line method. The gain or loss on disposal is

The following information is available from the annual reports of Reser Company and Trent Company Instructions (a) Based on the preceding information, compute the following values for each company: 1. Asset turnover ratio 2. Return on assets (b) What conclusion concerning the management of plant assets can be drawn from these data?

The asset turnover ratio is calculated as net sales divided by ending total assets.

Ron's Quik Shop bought equipment for $70,000 on January 1, 2013. Ron estimated the useful life to be 5 years with no salvage value, and the straight-line method of depreciation will be used. On January 1, 2014, Ron decides that the business will use the equipment for a total of 6 years. What is the revised depreciation expense for 2014?

Using the following data for Stevenson Industries, compute the return on assets ratio. Net Income \ 150,000 Total Assets 12/31/14 2,410,000 Total Assets 12/31/13 1,980,000 Net Sales 250,000

Mitchell Corporation bought equipment on January 1, 2014 .The equipment cost $180,000 and had an expected salvage value of $30,000. The life of the equipment was estimated to be 6 years. The depreciable cost of the equipment is

A plant asset must be fully depreciated before it can be removed from the books.

If the proceeds from the sale of a plant asset exceed its book value, a gain on disposal occurs.

The declining-balance method of computing depreciation expense involves multiplying a _______________ book value by a _______________ percentage.

A company purchased factory equipment on June 1, 2014, for $96,000. It is estimated that the equipment will have a $6,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2014, is

A plant asset with a cost of $480,000 and accumulated depreciation of $456,000 is sold for $56,000. What is the amount of the gain or loss on disposal of the plant asset?

Forcum Company reports the following information (in millions) during a recent year: net sales, $12,408.5; net earnings, $344.9; total assets, ending, $4,312.6; and total assets, beginning, $4,254.3. Instructions (a) Calculate the (1) return on assets, (2) asset turnover, and (3) profit margin ratios. (b) Prove mathematically how the profit margin and asset turnover ratios work together to explain return on assets, by showing the appropriate calculations.

The declining-balance method is an accelerated method of depreciation. Briefly explain what is meant by an accelerated method of depreciation and justify the choosing of an accelerated method.

A machine was purchased for $180,000 and it was estimated to have an $12,000 salvage value at the end of its useful life. Monthly depreciation expense of $1,400 was recorded using the straight-line method. The annual depreciation rate is

Equipment costing $70,000 with a salvage value of $14,000 and an estimated life of 8 years has been depreciated using the straight-line method for 2 years. Assuming a revised estimated total life of 6 years and no change in the salvage value, the depreciation expense for Year 3 would be

All leases are classified as either

Trademarks are generally shown on the balance sheet under