Exam 6: Accounting for Long-Term Operational Assets

How does IFRS differ from U.S. GAAP with regards to the accounting for property, plant, and equipment?

Emir Company purchased equipment that cost $110,000 cash on January 1, Year 1. The equipment had an expected useful life of six years and an estimated salvage value of $8,000. Assuming that Emir depreciates its assets under the straight-line method, the amount of depreciation expense shown on the income statement prepared for Year 4 and the amount of accumulated depreciation shown on the balance sheet prepared as of December 31, Year 4, respectively, would be: Depreciation expense Accumulated depreciation A. \ 17,000 \ 17,000 B. \ 17,000 \ 68,000 C. \ 68,000 \ 17,000 D. \ 17,000 \ 51,000

On March 1, Bartholomew Company purchased a new stamping machine with a list price of $70,000. The company paid cash for the machine; therefore, it was allowed a 5% discount. Other costs associated with the machine were: transportation costs, $1,300; sales tax paid, $3,120; installation costs, $1,000; routine maintenance during the first month of operation, $1,200. The cost recorded for the machine was:

Which of the following assets does not have an indefinite useful life?

Indicate how each event affects the horizontal financial statements model. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts.Increase = IDecrease = DNot Affected = NAThe Greer Company purchased equipment on account on January 1, Year 1. Show how the purchase affected the financial statements of Year 1.

Sheffield Corporation purchased equipment on January 1, Year 1 for $100,000. Sheffield used the straight-line method of depreciation with a $12,000 salvage value and a useful life of 5 years. On January 1, Year 3 Sheffield sold this equipment for $70,000. Required: Calculate the gain or loss Sheffield should recognize from this sale.

Which of the following is not subject to depreciation?

Good Company paid cash to purchase mineral reserves on a large parcel of land. Which of the following choices accurately reflects how this event would affect Good's financial statements?

Jing Company was started on January 1, Year 1 when it issued common stock for $50,000 cash. Also, on January 1, Year 1 the company purchased office equipment that cost $34,000 cash. The equipment was delivered under terms FOB shipping point, and transportation cost was $2,000. The equipment had a five-year useful life and a $12,000 expected salvage value.At the end of Year 5, assuming the equipment had not been sold, the book value of the office equipment using straight-line depreciation and double-declining-balance depreciation, respectively, would be:

Which of the following statements is true with regard to depreciation expense?

Which of the following terms is applied to long-term assets that have no physical substance and provide rights, privileges and special opportunities to businesses?

What items are included in the cost of a newly purchased building?

Which of the following would not be classified as a tangible long-term asset?

In Year 1, West Virginia Mining Company purchased a coal mine that contained an estimated 1,200,000 tons of coal, of which 1,000,000 tons can be profitably extracted, for a cash price of $58,500,000. The company mined 50,000 tons of coal in Year 1. Required:What is the amount of depletion to be recorded per ton of coal?What is the amount of depletion expense for Year 1?

The balance sheet of Flo's Restaurant showed total assets of $360,000, liabilities of $104,000 and stockholders' equity of $256,000. An appraiser estimated the fair value of the restaurant assets at $415,000. If Alice Company pays $505,000 cash for the restaurant the amount of goodwill acquired would be:

Farmer Company purchased equipment on January 1, Year 1 for $82,000. The equipment is estimated to have a 5-year life and a salvage value of $4,000. The company uses the straight-line depreciation method. If the original expected life remained the same (i.e., 5-years), but at the beginning of Year 4, the salvage value was revised to $8,000, the annual depreciation expense for each of the remaining years would be:

Jing Company was started on January 1, Year 1 when it issued common stock for $50,000 cash. Also, on January 1, Year 1 the company purchased office equipment that cost $34,000 cash. The equipment was delivered under terms FOB shipping point, and transportation cost was $2,000. The equipment had a five-year useful life and a $12,000 expected salvage value.Using double-declining-balance depreciation, what the amount of depreciation expense and the amount of accumulated depreciation, respectively, that would appear on the December 31, Year 3 financial statements?

Explain how a business using the straight-line method would re-compute depreciation after revising the useful life estimate.

On January 6, Year 1, the Mount Jackson Corporation purchased a tract of land for a factory site for $815,000. An existing building on the site was demolished and the construction of the new factory building was completed on October 11, Year 1. Additional cost data are shown below: construction cost of new building \9 84,000 Realtor's and attorney's fees 16,800 Architect's fees relating to construction of new 82,000 building Cost to demolish old building 75,700 Salvage recovery from old building (12,000) Which of the following correctly states the capitalized cost of the land and the new factory building, respectively?

The Hoover Company acquired the Burgess Company for $1,200,000 cash. The fair value of Burgess's assets was $1,040,000, and the company had liabilities of $60,000. How much goodwill will be recorded in connection with the acquisition?