Exam 6: Acquisition and Use of Long-Term Assets

An accelerated depreciation method refers to any method of depreciating a long-term,asset that will result in greater amounts being expensed in the early years of an asset's life and comparatively smaller amounts being expensed in the latter years of the asset's life.

When a company uses cash to purchase a machine,recording the purchase will ________.

On January 1,2011,Petrel Shipping Company bought equipment that cost $65,000 with an estimated useful life of 10 years and an estimated salvage value of $5,000.The company uses the double-declining balance method of depreciation.What will be the BOOK VALUE of the asset on December 31,2012?

On February 1, 2011, Delta Distribution Company purchased a delivery truck that cost $30,000. The truck has an estimated useful life of 150,000 miles and an estimated salvage value of $3,000. The truck is driven 10,000; 34,000; and 28,000 miles for the years 2011, 2012, and 2013, respectively. Required: 1. Calculate the depreciation expense per mile using the activity (units-of-production) method. 2. Use the activity method to complete the chart below: 3.Explain why long-term assets must be depreciated,rather than recorded as expenses in the period when the asset is purchased. 4.Explain why land is NOT depreciated when other assets,such as trucks,are depreciated.

Basquets,Inc.purchased land and two factories at a total cost of $800,000.To the right of the appraised values below,show the amount Basquets should record as the cost of each asset:

Explain when a cost should be recorded as a capital expenditure rather than an expense.

The Internal Revenue Service Code sets accounting rules,including depreciation,used to prepare financial statements issued to shareholders.

Tango Company purchased land and a building for $350,000.If the assets had been purchased separately,the company would have paid $170,000 for the land and $210,000 for the building.What amount should be recorded for the BUILDING?

Which of the statements below regarding capital expenditures is TRUE?

On January 1 2010,Max,Inc.paid $80,000 for a truck with an estimated useful life of 10 years and a $20,000 salvage value.During 2013,Max,Inc.'s truck was not running very well. Part A: Put an X in the appropriate box to show whether each item is an expense,a capital expenditure,or neither. Part B: 1.Straight-line depreciation expense for 2012 is $_____________________. 2.The book value of the machine at December 31,2012 is $___________________. 3.Straight-line depreciation expense for 2013,after the major overhaul,is $__________.

Return on assets is a ratio used to evaluate how effectively assets generate sales.

Intangible assets are depleted over their useful lives.

Use the following selected information from Alpha Corporation to determine the return on assets for the year.

Part A: Record the effect of each of the following sales of long-term assets on the accounting equation.Write in BOTH the correct dollar amounts and the titles of the accounts involved. Part B: Use your answer from Part A,SALE 2. to answer the following three questions: a. $7,472 cash from operating activities b. $30,000 cash from operating activities c. $7,472 cash from investing activities. d. $30,000 cash from investing activities e. $7,472 cash from financing activities f. $30,000 cash from financing activities

Identify each of the assets listed below with the appropriate classification: A = Long-term asset B = Not a long-term asset

Robin Blind,Inc.recorded the following entries during the year.Put an X in the appropriate box to indicate whether each entry caused net income and total assets to be overstated,understated,or correctly stated. 1.Recorded depreciation for the year using $0 salvage value when the salvage value was expected to be $5,000. 2.Depreciated its airplanes over a life of 35 years,which is 10 years longer than the average life of airplanes. 3.Recorded ordinary repairs as capital expenditures. 4.Recorded the purchase of patents as an expense.The purchase should have been capitalized. 5.Recorded its research and development costs as expenses.

On November 1,2011,Frigate Shipping Company bought equipment that cost $400,000,with an estimated useful life of 8 years and an estimated salvage value of $28,000.The company uses the straight-line method of depreciation and has a fiscal year ending on October 31.For the year ended October 31,2012,Frigate Company will report depreciation expense of ________.

Generally accepted accounting principles are used to determine the depreciation deduction available on a tax return.

On January 1,2011,Ace Electronics paid $400,000 cash for a computer that would be used to store and process its accounting information.The computer has a 5-year useful life,after which it will be worthless because it will be obsolete.Ace Electronics uses the straight-line method to depreciate its assets.At December 31,2012,Ace will have accumulated depreciation of ________.

Segregation of duties means that ________.