Exam 10: Long Term Assets

Land held for speculative purposes should be classified as a long-term investment.

In accounting,depreciation means the decline in value of an asset.

The federal government grants patents for

Machinery was purchased for $90,000.It had an estimated residual value of $14,000 and has a current carrying value of $18,000.Its depreciable cost must have been

Overton Corporation purchased a truck for $80,000.The company expected the truck to last four years or 100,000 miles,with an estimated residual value of $8,000 at the end of that time.During the second year,the truck was driven 27,500 miles.Compute the depreciation for the second year under each of the following methods: (a)straight-line,(b)production,and (c)double-declining-balance.(Show your work.)

A building not currently used because economic conditions have limited a company's expansion should not be classified as property,plant,and equipment.

Book value refers to unexpired portion of an asset's cost.

Marcus Photography purchased photographic equipment for $75,000.The equipment was to be used for ten years and had a $5,000 estimated residual value.After the company took three years of straight-line depreciation,it decided that the equipment would instead have a $2,000 residual value and a total useful life of eleven years.Calculate depreciation expense that should be recorded in year 4.(Show your work.)

Salvage value is not the same as

A truck that cost $29,600 and on which $21,600 of accumulated depreciation had been recorded was disposed of on September 1,the first day of the new fiscal year.Prepare entries in journal form without explanation to record the disposal under each of the following assumptions: a.It was discarded as having no value. b.It was sold for $6,000 cash. c.It was sold for $11,200 cash.

The cost of land should include accrued property taxes paid by the purchaser.

A patent has a legal life of 30 years.

A debit to Accumulated Depreciation will increase the carrying value of an asset.

Extraordinary repairs are recorded with a debit to Accumulated Depreciation.

Equipment is purchased for $80,000.It has an eight-year useful life and a $39,250 residual value.Under the double-declining-balance method,what is the depreciation expense for year 3?

The cost of a long-term asset is expensed

When disposing of equipment,the Equipment account is credited for the existing carrying value.

Equipment costing $60,000 with a residual value of $6,000 and an estimated life of eight years has been depreciated using the straight-line method for two years.Assuming a revised estimated total life of five years,the depreciation expense for year 3 would be

One argument in favor of accelerated depreciation is that the assets benefit is greater in the earlier years.

Long-term assets include tangible assets,natural resources,and intangible assets.Explain the difference between each of these types of assets and explain how each is accounted for on the income statement.