Exam 10: Long Term Assets

On October 1,2011,Racie's Auto Repair purchased diagnostic equipment for $13,600.The equipment had an estimated residual value of $4,000 and an eight-year life and was sold on April 1,2013.Assuming that the company depreciates the asset on a straight-line basis and reports on a calendar-year basis,journalize the following independent transactions in the journal provided.(Omit explanations.) a.The entry to update depreciation to April 1,2013 b.The entry to record the sale for $12,000 c.The entry to record the sale instead for $8,600 d.The entry to record the sale instead for $11,800

Gain on Sale of Machinery is recorded as a credit.

Interest costs are included in the cost of an asset in conjunction with

Oren Company's air-conditioning system has just completed the eighth year of an estimated ten-year life.The system cost $60,000 and now has accumulated depreciation of $48,000.At the beginning of the ninth year,the company expects to spend $16,000 on a complete renovation of the system and expects the total life of the system to be fifteen years.Neither the capacity of the system nor the residual value was increased.The company uses the straight-line method to determine depreciation.Determine the following: (a)the account debited for the cost of renovation,(b)the carrying value of the system after renovation,and (c)the depreciation expense for the ninth year.

Under what circumstances will a loss be recorded on the sale of equipment,and what effect will the loss have on stockholders' equity?

A machine that cost $72,000 and on which $52,000 of depreciation had been recorded was disposed of for $20,800.Indicate whether a gain or a loss should be recorded,and for what amount.

If a revenue expenditure is incorrectly recorded on a company's books as a capital expenditure,which of the following statements will be true?

Goodwill equals the excess paid for a business over the fair market value of the net assets purchased.

A truck that cost $80,000 and on which $60,000 of accumulated depreciation had been recorded was disposed of on July 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 $14,400 cash. c.It was sold for $27,000 cash.

How is Accumulated Depletion disclosed in the financial statements?

A truck that cost $20,000 and on which $8,000 of depreciation had been recorded was disposed of for $11,600.Indicate whether a gain or loss should be recorded,and for what amount.

In 2012,Hamblen Enterprises purchased an oil well for $24,000,000.It is estimated that 160,000,000 barrels can be extracted from the well.Depletion expense during 2013,when 4,000,000 barrels were extracted and sold,totaled

A revenue expenditure results in the immediate recognition of an expense.

The construction of a new wing on an existing building is best described as a(n)

Saticoy Corporation purchased a truck for $50,000.The company expected the truck to last five years or 100,000 miles,with an estimated residual value of $5,000 at the end of that time.During the second year,the truck was driven 23,000 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 truck that cost $24,000 and on which $18,000 of accumulated depreciation has been recorded was disposed of on January 1.If the truck was discarded as having no value,the entry to record this event is:

A capital expenditure will result in an immediate increase in long-term assets.

A betterment adds to the physical layout of an asset.

One argument in favor of accelerated depreciation is that repair expense is likely to be smaller in later years.

If the net present value of a long-term asset under consideration for purchase is negative,then the asset should not be purchased.