Exam 9: Reporting and Interpreting Long-Lived Tangible and Intangible Assets

On January 1,2016,Trueblood,Inc.purchased a piece of machinery for use in operations.The total acquisition cost was $33,000.The machine has an estimated useful life of three years and a residual value of $3,000.Assume that units produced by the machine will total 16,000 during 2016,23,000 during 2017,and 21,000 during 2018. Required: Part a.Use this information to complete the following table. Part b.On January 1,2017,the machine was rebuilt at a cost of $7,000.After it was rebuilt,the total estimated life of the machine was increased to five years (from the original estimate of three years)and the residual value to $6,000 (from $3,000).Assume that the company chose the straight-line method for depreciation.Compute the annual depreciation expense after the change in estimates. Part c.Prepare the adjusting entry to record the depreciation expense for the year ended December 31,2017. Part d.On December 31,2018,the machine was sold for $7,500.Compute the book value on that date. Part e.Prepare the journal entry to record the sale.

Sunny Skys,Inc.bought a derelict hunting lodge,which it tore down at a cost of $45,000 and replaced with a new lodge.The demolition cost should be:

Intangible assets with limited lives are usually amortized using the straight-line method with no residual value.

Use the information above to answer the following question.Using the straight-line method,what is the amount of depreciation expense each year?

California Spas recently learned that the value of its building required a write-down because of the discovery that it was on an earthquake fault line.The book value of the building was $1,570,000 before the discovery and the fair value was $975,000 after the discovery.Which of the following is the journal entry used to record the asset impairment?

Which of the following statements about the end of an asset's life is not correct?

Tax accounting and financial accounting use the same depreciation calculations and there are no differences in the results between the two accounting systems.

When S.Dee Company bought B.Darin Company,the purchase price included a patent valued at $15,000.The patent has 10 years remaining of its legal life,but its estimated useful life to S.Dee Company was only 8 years.The journal entry to record the annual patent amortization would include a:

Assuming two companies use the same accounting methods,other things being equal,the company with a higher fixed asset turnover ratio:

Generally,freight costs incurred when a long-lived asset is purchased should be:

A company bought land and a building for $128,000.The building has a useful life of 20 years.Why should the company split the $128,000 cost between the land and the building?

One difference between the double-declining-balance method and the straight-line method is that the double-declining-balance method:

Maxim,Inc.changed its depreciation method from units-of-production to straight-line.Maxim is:

The costs assigned to the individual assets acquired in a basket purchase are based on their relative:

Morris Lest,Inc.sold its truck and received less cash than the truck's book value.The net effect of this sale on the accounting equation is a(n):

Ace Electronics bought a new cash register for $2,500.Ace plans to use the cash register for 4 years and then sell it for $200.The cash register's depreciable cost equals:

An asset's residual value is:

On January 1,2016,Busy Beaver,Inc.signed a $315,000,5year note payable to buy a new industrial veneer cutter.Busy Beaver plans to use the machine for 10 years and then sell it for its scrap value of $5,000.Using straight-line depreciation,depreciation expense for the year ended December 31,2016 equals:

Ordinary repairs and maintenance:

Morris Lest,Inc.sold its delivery truck for $500 more than its book value.The sale will result in a(n):