Exam 8: Accounting for Long-Term Assets

Bering Rock acquires a granite quarry at a cost of $590,000,which is estimated to contain 200,000 tons of granite and is expected to take 6 years to remove.What journal entry would be needed to record the expense for the first year assuming 38,000 tons were removed and sold?

A new machine costing $1,800,000 cash and estimated to have a $60,000 salvage value was purchased on January 1.The machine is expected to produce 600,000 units of product during its 8-year useful life.Calculate the depreciation expense in the first year under the following independent situations: 1.The company uses the units-of-production method and the machine produces 70,000 units of product during its first year. 2.The company uses the double-declining-balance method. 3.The company uses the straight-line method.

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000.The machine is depreciated using the units-of-production method.The company estimates it will use the machine for 5 years,during which time it anticipates producing 40,000 units.The machine is estimated to have a $4,000 salvage value.The company produces 9,000 units in year 1 and 6,000 units in year 2.Depreciation expense in year 2 is:

Salvage value is an estimate of an asset's value at the end of its useful life.

A company purchased a delivery van for $28,000 with a salvage value of $3,000 on September 1,Year 1.It has an estimated useful life of 5 years.Using the straight-line method,how much depreciation expense should the company recognize on December 31,Year 1?

The depreciation method that uses a depreciation rate that is a multiple of the straight-line rate and applies it to an asset's beginning-of-period book value is ________.

In year one,McClintock Co.acquired a truck that cost $75,500 with an estimated $14,000 salvage value and 4 year estimated useful life.Depreciation in the first year was $15,375.McClintock had the following transactions involving plant assets during Year 2.Unless otherwise indicated,all transactions were for cash. Prepare the general journal entries to record these transactions.

A company traded an old forklift for a new forklift,receiving a $13,500 trade-in allowance and paying the remaining $47,200 in cash.The old forklift had cost $43,000,a 5-year useful life and a $5,000 salvage value.Straight-line accumulated depreciation of $27,200 had been recorded as of the exchange date. 1.What was the book value of the old forklift on the date of the exchange? 2.What amount of gain or loss (indicate which)should be recognized in recording the exchange,assuming the transaction has commercial substance? 3.What amount should be recorded as the cost of the new forklift?

A company discarded a computer system originally purchased for $18,000.The accumulated depreciation was $17,200.The company should recognize a(an):

The relevant factors in computing depreciation do not include:

Plant assets can be disposed of by discarding,selling,or exchanging them.

Amortization is:

The depreciation method that charges the same amount of expense to each period of the asset's useful life is called:

Suarez Company uses the straight-line method of depreciation.The company purchased a computer system on January 1,Year 1,for $1,600,000 with an expected life of six years and a salvage value of $130,000.Assuming the computer is sold on July 1,Year 3 for $1,000,000 cash,prepare the journal entries to record depreciation for the first 6 months of Year 3 and the sale of the computer.

The modified accelerated cost recovery system (MACRS):

Which of the following is not classified as plant assets?

The following information is available on a depreciable asset owned by Mutual Savings Bank: The asset's book value is $70,000 on July 1,Year 3.On that date,management determines that the asset's salvage value should be $5,000 rather than the original estimate of $10,000.Based on this information,the amount of depreciation expense the company should recognize during the last six months of Year 3 would be:

Explain the impact,if any,on depreciation when estimates that determine depreciation change.

Amortization is the process of allocating the cost of natural resources to periods when they are consumed.

A copyright gives its owner the exclusive right to publish and sell a musical,literary,or artistic work during the life of the creator plus 17 years.