Exam 9: Long-Lived Assets

Use the following information for question 166 - 167. Maverick Inc. exchanged an old vehicle for a new vehicle on August 31, 2014. The original cost of the vehicle was $45,000 on January 1, 2010. Depreciation was calculated using the straight line method over a ten-year useful life, with an estimated residual value of $3,000. The fair value of the old vehicle on August 31, 2014 was $21,500. The list price of the new vehicle was $30,000. Maverick received a $24,000 trade in allowance from the dealership and paid $6,000 cash for the new vehicle. -The new machinery should be recorded on Maverick's books at

Which of the following is NOT an intangible asset that is reported on the balance sheet?

Use of straight-line depreciation in comparison to the diminishing-balance method results in 1) a greater amount of depreciation in the earlier years of an asset's useful life. 2) a greater amount of depreciation in the later years of an asset's useful life. 3) an equal amount of depreciation over an asset's total useful life.

Management should select the depreciation method that

Natural resources are generally shown on the balance sheet under

Use of the units-of-production method of depreciation results in

Presented below are selected transactions for Mohamad Company for 2014. Jan 1 Received $3,000 scrap value on retirement of machinery that was purchased on January 1, 2003. The machine cost $80,000 on that date, and had an estimated useful life of 10 years with no residual value. Apl 30 Sold a printing machine for $50,000 that was purchased on January 1, 2011. The printer cost $90,000, and had an estimated useful life of 5 years with no residual value. Dec 31 Discarded a business automobile that was purchased on September 1, 2009. The car cost $20,000 and was depreciated on an 8-year useful life with a residual value of $800. Instructions Journalize all entries required as a result of the above transactions. Mohamad Company uses the straight-line method of depreciation and has recorded depreciation to December 31, 2013.

An asset's cost is allocated to expense over the asset's useful life because the asset is used to help generate revenue over that period of time.

A basket purchase of long-lived assets requires that the fair values be assigned based on the cost of each asset.

A company purchased a delivery truck for $60,000. It is estimated that the truck will have a $10,000 residual value at the end of its estimated 5-year useful life. If the company uses the double diminishing-balance method of depreciation, the amount of annual depreciation recorded for the second year after purchase would be

Under IFRS, at each year end, the company must determine whether or not an impairment loss still exists by measuring the asset's recoverable amount.

Merry Clinic purchases land for $80,000 cash. The clinic assumes $2,000 in property taxes due on the land. The legal fees totalled $1,000. The clinic has the land graded for $2,200. What amount does Merry Clinic record as the cost for the land?

Additions and improvements to a long-lived asset that increase the asset's operating efficiency, productive capacity, or expected useful life are generally expensed in the period incurred.

Winningham Company sold the following two machines in 2014: Instructions Journalize all entries required to update depreciation and record the sales of the two assets in 2014. The company has recorded depreciation on the machine to December 31, 2013.

Assets are depreciated over their useful lives even if the use of the asset is NOT directly related to earning profit.

Johansan Mining Company purchased a mine for $80 million which is estimated to have 250,000 tonnes of ore and a residual value of $10 million. In the first year 50,000 tonnes of ore are extracted and sold. In the second year 150,000 tonnes of ore are extracted but only 125,000 tonnes are sold. Instructions a. Prepare the journal entry to record depreciation expense for the first year and the second year. b. What amount and in what account are the tonnes of ore not sold reported?

The first step in recording a disposal of a long-lived asset is to update that asset's depreciation.

A company sells a long-lived asset which originally cost $150,000 for $50,000 on December 31, 2014. The accumulated depreciation account had a balance of $60,000 after the current year's depreciation of $15,000 had been recorded. The company should recognize a

A patent can be renewed

The diminishing-balance method of amortization is the most common method of amortization for intangibles.