Exam 9: Long-Lived Assets

Using the units-of-production method of depreciating factory equipment will generally result in more depreciation expense being recorded over the life of the asset than if the straight-line method had been used.

The amount of an asset's residual value does NOT affect the calculation of depreciation in the units-of-production method.

Natural resources are often called wasting assets because it is difficult to use the assets in an efficient manner.

Land improvements decline in service potential with time.

If paid by the purchaser, freight charges and insurance during transit are included in the cost of equipment.

Which of the following statements concerning financial statement presentation is NOT a true statement?

Expenditures that maintain the operating efficiency and expected productive life of a long-lived asset are generally

Below are transactions for Oriel Company. 1. Purchased land for $900,000. 2. Paid $20,000 to demolish building located on land. 3. Paid $3,000 for building permit. 4. Paid $2,000 for architect fees. 5. Paid $3,000 for excavation costs. 6. Paid interest of $22,000 during construction of new building. 7. Paid $960,000 to complete the building. 8. Paid $30,000 to pave the parking lot. 9. Paid $4,000 for underground sprinkler. 10. Ordered new equipment, paid $30,000. 11. Paid $1,500 to install and test new equipment. 12. Paid $250 to insure equipment for one year. 13. Paid $2,500 to paint office walls in the new building. 14. Paid $2,000 to repair equipment. 15. Purchased a truck for $25,000. 16. Paid $250 for truck license. 17. Paid $60 for oil change on new truck. 18. Paid $15,000 for fences around the new building. 19. Purchased 2 cash registers for $1,100 each. 20. Paid $2,200 for annual yard maintenance. Instructions a. Determine if each item should be capitalized (C) or expensed (E). b. Determine the balance in the land account and the building account.

Which of the following methods of depreciation results in the highest cash flow?

Which is NOT a method of depreciation?

A loss on disposal of a long-lived asset as a result of a sale or a retirement is calculated in the same way.

If insurance is incurred transporting the asset to its final position, this insurance will be added to the cost of the asset.

The appropriateness of the depreciation method selected should be reviewed at least

The balance in the accumulated depreciation account represents the

An impairment loss can only occur in long-lived assets with a finite life.

IFRS does allow for reversals of impairment losses on both finite-life and other indefinite-life intangible assets if their value increases in the future.

Under the double diminishing-balance method, the depreciation rate used each year remains constant.

A company purchased property for $300,000. The property included an acre of land valued at $50,000, a building valued at $150,000, and equipment valued at $125,000. -The above transaction may be referred to as a

Lussier Company purchased a new computer for $175,000. It is estimated that the computer will have a $15,000 residual value at the end of its 5-year useful service life. The double diminishing-balance method of depreciation will be used. Instructions Prepare a depreciation schedule which shows the annual depreciation expense on the computer for its 5-year life.

A long-lived asset cost $24,000 and is estimated to have a $3,000 residual value at the end of its 8-year useful life. The annual depreciation expense recorded for the third year using the double diminishing-balance method would be