Exam 9: Reporting and Analyzing Long-Lived Assets

Brevard Corporation purchased a taxicab on January 1, 2013 for $25,500 to use for its shuttle business. The cab is expected to have a five-year useful life and no salvage value. During 2014, it retouched the cab's paint at a cost of $1,200, replaced the transmission for $3,000 (which extended its life by an additional 2 years), and tuned-up the motor for $150. If Brevard Corporation uses straight-line depreciation, what annual depreciation will Brevard report for 2014?

Schrock Company purchases a new delivery van for $60,000. The sales taxes are $4,500. The logo of the company is painted on the side of the van for $1,200. The van's annual license is $120. The van undergoes safety testing for $220. What does Schrock record as the cost of the new van?

Vickers Company uses the units-of-activity method in computing depreciation. A new plant asset is purchased for $36,000 that will produce an estimated 100,000 units over its useful life. Estimated salvage value at the end of its useful life is $3,000. What is the depreciation cost per unit?

The depreciation method that applies a constant percentage to depreciable cost in calculating depreciation is

IFRS allows companies to revalue plant assets to fair value. Which of the following statements is correct regarding revaluation?

When purchasing land, the costs for clearing, draining, filling, and grading should be charged to a Land Improvements account.

Mike Geary, the controller of Shellhammer Company, has reviewed the expected useful lives and salvage values of selected depreciable assets at the beginning of 2014. Here are his findings: All assets are depreciated by the straight-line method. Shellhammer Company uses a calendar year in preparing annual financial statements. After discussion, management has agreed to accept Mike's proposed changes. (The "Proposed" useful life is total life, not remaining life.) Instructions (a) Compute the revised annual depreciation on each asset in 2014. (Show computations.) (b) Prepare the entry (or entries) to record depreciation on the building in 2014.

The following information is provided for Nguyen Company and Northwest Corporation. If Nguyen and Northwest are in the same industry and the industry average for return on assets is equal to 30%, which of the following statements is true?

Once cost is established for a plant asset, it becomes the basis of accounting for the asset unless the asset appreciates in value, in which case, market value becomes the basis for accountability.

Here are selected 2014 transactions of Howe Corporation. Jan. 1 Retired a piece of equipment that was purchased on January 1, 2004. The equipment cost $55,000 and had a useful life of 10 years with no salvage value. June 30 Sold equipment that was purchased on January 1, 2012. The equipment cost $78,000 and had a useful life of 3 years with no salvage value. The equipment was sold for $9,000 cash. Dec. 31 Sold equipment for $12,500 cash. The equipment cost $43,000 when it was purchased on January 1, 2011, and was depreciated based on a 5-year useful life with a $3,000 salvage value. Instructions Journalize all entries required on the above dates, including entries to update depreciation on assets disposed of, where applicable. Howe Corporation uses straight-line depreciation.

Pearson Company bought a machine on January 1, 2014. The machine cost $144,000 and had an expected salvage value of $24,000. The life of the machine was estimated to be 5 years. The book value of the machine at the beginning of the third year would be

Pearson Company bought a machine on January 1, 2014. The machine cost $144,000 and had an expected salvage value of $24,000. The life of the machine was estimated to be 5 years. The depreciable cost of the machine is

Bates Company purchased equipment on January 1, 2013, at a total invoice cost of $900,000. The equipment has an estimated salvage value of $22,500 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at December 31, 2014, if the straight-line method of depreciation is used?

Kathy's Blooms purchased a delivery van with a $50,000 list price. The company was given a $5,000 cash discount by the dealer, and paid $2,500 sales tax. Annual insurance on the van is $1,250. As a result of the purchase, by how much will Kathy's Blooms increase its van account?

The book value of a plant asset is always equal to its fair market value.

When a change in estimate is made, there is no correction of previously recorded depreciation expense.

Newell Company purchased a machine with a list price of $96,000. They were given a 10% discount by the manufacturer. They paid $600 for shipping and sales tax of $4,500. Newell estimates that the machine will have a useful life of 10 years and a residual value of $30,000. If Newell uses straight-line depreciation, annual depreciation will be

The _______________ price is equal to the fair market value of the asset given up or the fair market value of the asset received.

A loss on disposal of a plant asset as a result of a sale or a retirement is calculated in the same way as a gain on disposal.

Goodwill