Exam 10: Long Term Assets

Leroy Mining Company purchased land containing an estimated 10,000,000 tons of ore for a cost of $750,000.The land without the ore is estimated to be worth $150,000 (the residual value).Buildings costing $45,000 with an estimated useful life of 20 years were erected on the site.Because of the remote location,the buildings have no residual value.The company expects that all the usable ore can be mined in eight years.During its first year of operation,the company mined 1,000,000 tons of ore and at the end of the year had an inventory of 200,000 tons.Determine the following amounts for the first year: (a)depletion charge per ton; (b)depletion expense for the year; and (c)depreciation expense for buildings,using the straight-line method.(Show your work.)

If the fair value of goodwill is less than its carrying value,an impairment loss must be recorded.

When the trade-in allowance exceeds the carrying value of an asset exchanged,a loss has occurred.

Extraordinary repairs usually are recorded by making a debit to

Cocke Mining Company purchases a gravel pit for $5,000,000.It estimates that 10,000,000 tons of gravel can be extracted over the pit's useful life.If 1,000,000 tons are extracted during the first year but only 750,000 tons are sold,what amount should be recorded for Gravel Inventory and Accumulated Depletion,respectively?

A machine was purchased for $78,000.It has a current carrying value of $36,000 and had a depreciable cost of $50,000.Its estimated residual value must have been

A reduction in carrying value as a result of impairment is recorded as a gain.

A copyright is obtained for what becomes a very successful book.The publisher expects the book to generate sales for ten years.The copyright should be

Ordinary repairs usually result in a debit to the appropriate Accumulated Depreciation account.

Which of the following costs normally is expensed in the year incurred,regardless of the extent of future benefit?

On January 1,2012,Rhea Manufacturing Company purchased for $80,000 a machine that will produce an estimated 75,000 units of Product X.The machine has an estimated useful life of four years and an estimated residual value of $8,000.Calculate the following amounts,rounding answers to the nearest dollar: (a)the carrying value of the machine after it has been used for three and one-half years,under the straight-line method; (b)depreciation expense for 2013,under the production method (assume that 13,000 units were produced that year); and (c)accumulated depreciation at the end of 2013 under the double-declining-balance method.(Show your work.)

A company purchases land,a building on the land,and equipment in the building all for $400,000 cash.The appraised values are $270,000,$135,000,and $45,000 for the land,building,and equipment,respectively.In the journal provided,record the entry for the purchase.(Omit explanation.)

McMinn,Inc.purchased equipment for $100,000.The equipment had an estimated useful life of eight years and an estimated residual value of $12,000.After five years of use,the estimated residual value is changed to $18,000.Assuming straight-line depreciation,depreciation expense in year 6 would be

Which of the following is not a characteristic of all long-term assets?

When an asset is sold,a gain is calculated as the difference between

The exclusive right to publish and sell a literary,artistic,or musical work is called a

The exclusive right to use an identifying symbol is called a trademark.

Federal tax law does not allow the rapid write-off of plant assets.

Which of the following would not be considered a capital expenditure?

Hickman Company purchases a piece of equipment on Jan.2,2013,for $60,000.The equipment has an estimated life of eight years or 50,000 units of production and an estimated residual value of $6,000.Hickman uses a calendar fiscal year.The entry to record the amount of depreciation for 2013,using the double-declining-balance method,is: