Exam 9: Reporting and Analyzing Long-Lived Assets

Runge Company purchased machinery on January 1 at a list price of $250,000, with credit terms 2/10, n/30. Payment was made within the discount period. Runge paid $12,500 sales tax on the machinery, and paid installation charges of $4,400. Prior to installation, Runge paid $10,000 to pour a concrete slab on which to place the machinery. What is the total cost of the new machinery?

On July 1, 2014, Dillman Kennels sells equipment for $66,000. The equipment originally cost $180,000, had an estimated 5-year life and an expected salvage value of $30,000. The Accumulated Depreciation account had a balance of $105,000 on January 1, 2014, using the straight-line method. The gain or loss on disposal is

A patent should

If disposal of a plant asset occurs during the year, depreciation is

All the following are needed for the computation of depreciation except

On July 1, 2014, Linden Company purchased the copyright to Norman Computer Tutorials for $140,000. It is estimated that the copyright will have a useful life of 5 years. The amount of amortization expense recognized for the year 2014 would be

Franchises are classified as a plant asset.

Which of the following methods will result in the highest depreciation in the first year?

A _____________ decline in the market value of an asset is referred to as an impairment.

During the current year Knight Company incurred several expenditures. Briefly explain whether the expenditures listed below should be recorded as an operating expense or as an intangible asset. If you view the expenditure as an intangible asset, indicate the number of years over which the asset should be amortized. Explain your answer. (a) Spent $30,000 in legal costs in a patent defense suit. The patent was unsuccessfully defended. (b) Purchased a trademark from another company. The trademark can be renewed indefinitely. Knight Company expected the trademark to contribute to revenue indefinitely. (c) Knight Company acquires a patent for $2,000,000. The company selling the patent has spent $1,000,000 on the research and development of it. The patent has a remaining life of 15 years. (d) Knight Company is spending considerable time and money in developing a different patent for another product. So far $3,000,000 has been spent this year on research and development. Knight Company is very confident they will obtain this patent in the next few years.

Intangible assets are rights, privileges, and competitive advantages that result from ownership of long-lived assets without physical substance.

Research and development costs

The cost of a patent should be amortized over its legal life or useful life, whichever is shorter.

Ordinary repairs that maintain operating efficiency and expected productive life are called _______________.

An asset that cannot be sold individually in the market place is

A plant asset with a cost of $240,000 and accumulated depreciation of $228,000 is sold for $28,000. What is the amount of the gain or loss on disposal of the plant asset?

Nicholson Company purchased equipment on January 1, 2012, for €28,000 with an estimated residual value of €7,000 and estimated useful life of 8 years. On January 1, 2014, Nicholson decided the equipment will last 12 years from the date of purchase. The residual value is still estimated at €7,000. Using the straight-line method the new annual depreciation will be:

Presented below is information related to plant assets and intangible assets at year end on December 31, 2014, for Looper Company: Buildings \ 1,180,000 Goodwill 370,000 Patents 480,000 Land 390,000 Accumulated Depreciation 650,000 Instructions Prepare a partial balance sheet for Looper Company that shows how the above listed items would be presented.

The cost of an intangible asset must be amortized over a 20-year period.