Exam 9: Long-Lived Assets

All of the following are examples of wasting assets EXCEPT a

On May 5, 2014, Knottinghill Company purchased a property for $400,000 cash. The property included the following long-lived assets: Instructions a. Give the journal entry to allocate the purchase price between the above assets. Round all amounts to the nearest dollar, if necessary. b. Prepare a compound journal entry to record depreciation of the long-lived assets on December 31, 2014, assuming the following additional details: Prorate depreciation based on the number of months the asset has been in use.

The depreciation method that applies a constant percentage to the carrying amount of an asset in calculating depreciation is

Allteak Paper Products sold two machines in 2014. The following information pertains to the two machines: Instructions a. Calculate the accumulated depreciation on each machine at the date of disposal. b. Prepare the journal entries in 2014 to record 2014 depreciation and the sale of each machine.

Depreciation is the systematic allocation of the cost of a long-lived asset, such as property, plant, and equipment, over the asset's physical life.

A long-lived asset must be fully depreciated before it can be removed from the books.

The units-of-production method is ideal for equipment whose production can be measured in units of output.

Architect's fee for the plans for a new building would be included in the cost of the land improvements.

General Paint Company is building a new plant that will take three years to construct. The construction will be financed in part by funds borrowed during the construction period. There are significant architect fees, excavation fees, and building permit fees. Which of the following statements is true?

Which of the following is NOT true of ordinary repairs?

In calculating depreciation, residual value is

The accumulated depreciation account represents a cash fund available to replace long-lived assets.

During the current year, Lui Company incurred several expenditures. 1. Spent $50,000 in legal costs in a patent defence suit. The patent was unsuccessfully defended. 2. Purchased a trademark from another company. The trademark can be renewed indefinitely. Lui Company expected the trademark to contribute to revenue indefinitely. 3. Lui 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 legal life of 15 years and an estimated 5-year useful life. 4. Lui 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. Lui Company is very confident it will obtain this patent in the next few years. Instructions Briefly explain whether the expenditures listed above should be recorded as an operating expense or as an intangible asset. If you view the expenditure as an intangible asset, indicate whether the asset should be amortized or not, and if so, the number of years over which it should be amortized. Explain your answer.

A gain on disposal of an asset occurs when the proceeds of the sale are greater than the

Depreciation of natural resources is initially debited to

A company purchased office equipment for $10,000 and estimated a residual value of $2,000 at the end of its 4-year useful life. The constant percentage to be applied against carrying amount each year if the double diminishing-balance method is used is

Natural resource depreciation is most often a function of

When estimating the useful life of an asset, accountants do NOT consider

In the diminishing-balance method, the depreciation expense will decrease each year.

The diminishing-balance method of depreciation produces a(n)