Exam 9: Reporting and Analyzing Long-Lived Assets

If a plant asset is sold at a gain, the gain on disposal should reduce the cost of goods sold section of the income statement.

Machinery was purchased for $170,000. Freight charges amounted to $7,000 and there was a cost of $20,000 for building a foundation and installing the machinery. It is estimated that the machinery will have a $30,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be

Equipment with a cost of $320,000 has an estimated salvage value of $30,000 and an estimated life of 4 years or 12,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 3,000 hours?

______________ is the process of allocating the cost of a plant asset to expense over its service life in a rational and systematic manner.

The declining-balance method of computing depreciation is known as an _____________ depreciation method.

In calculating depreciation, both plant asset cost and useful life are based on estimates.

In recording the acquisition cost of an entire business

How is a gain or a loss on the sale of a plant asset computed?

Danford Trucking purchased a tractor trailer for $126,000. Danford uses the units-of-activity method for depreciating its trucks and expects to drive the truck 1,000,000 miles over its 12-year useful life. Salvage value is estimated to be $18,000. If the truck is driven 80,000 miles in its first year, how much depreciation expense should Danford record?

Expenditures that add to the utility of plant assets for more than one accounting period are

Equipment that cost $54,000 and on which $30,000 of accumulated depreciation has been recorded was disposed of for $27,000 cash. The entry to record this event would include a

A characteristic of capital expenditures is that the expenditures occur frequently during the period of ownership.

Cost allocation of an intangible asset is referred to as

A plant asset was purchased on January 1 for $45,000 with an estimated salvage value of $5,000 at the end of its useful life. The current year's Depreciation Expense is $5,000 calculated on the straight-line basis and the balance of the Accumulated Depreciation account at the end of the year is $25,000. The remaining useful life of the plant asset is

Goodwill is recorded only when there is an exchange transaction that involves the purchase of an entire business.

Ramirez Company acquires land for $210,000 cash. Additional costs are as follow. Removal of shed \ 2,000 Filling and grading 6,000 Salvage value of lumber of shed 1,280 Broker commission 4,520 Paving of parking lot 40,000 Closing costs 3,400 Ramirez will record the acquisition cost of the land as

How is the cost for a plant asset measured in a cash transaction? In a noncash transaction?

Burke Company purchases land for $90,000 cash. Burke assumes $2,500 in property taxes due on the land. The title and attorney fees totaled $1,000. Burke has the land graded for $2,200. They paid $10,000 for paving of a parking lot. What amount does Burke record as the cost for the land?

The _______________ ratio is calculated by dividing net sales by average total assets.

Jack's Copy Shop bought equipment for $150,000 on January 1, 2013. Jack estimated the useful life to be 3 years with no salvage value, and the straight-line method of depreciation will be used. On January 1, 2014, Jack decides that the business will use the equipment for a total of 5 years. What is the revised depreciation expense for 2014?