Exam 8: Accounting for Long-Term Assets

Martin Company purchases a machine at the beginning of the year at a cost of $60,000.The machine is depreciated using the straight-line method.The machine's useful life is estimated to be 4 years with a $5,000 salvage value. -Depreciation expense in year 4 is:

Once an asset's book value equals its salvage value,depreciation stops.

A company purchased and installed equipment on January 1 at a total cost of $72,000.Straight-line depreciation was calculated based on the assumption of a five-year life and no salvage value.The equipment was disposed of on July 1 of the fourth year.The company uses the calendar year. 1.Prepare the general journal entry to update depreciation to July 1 in the fourth year. 2.Prepare the general journal entry to record the disposal of the equipment under each of these three independent situations: a.The equipment was sold for $22,000 cash. b.The equipment was sold for $15,000 cash. c.The equipment was totally destroyed in a fire and the insurance company settled the claim for $18,000 cash.

A machine costing $450,000 with a 4-year life and an estimated salvage value of $30,000 is installed by Peters Company on January 1.The company estimates the machine will produce 1,050,000 units of product during its life.It actually produces the following units for the first 2 years: Year 1,260,000; Year 2,275,000.Enter the depreciation amounts for years 1 and 2 in the table below for each depreciation method.Show calculation of amounts below the table. Double

Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $87,000.The machine's useful life is estimated to be 5 years,or 400,000 units of product,with a $7,000 salvage value.During its second year,the machine produces 84,500 units of product. -What journal entry would be needed to record the machines' second year depreciation under the units-of-production method?

The Oberon Company purchased a delivery truck for $95,000 on January 2.The truck was estimated to have a $3,000 salvage value and a 4 year life.The truck was depreciated using the straight-line method.At the beginning of the third year,it was determined the truck's total useful life would be 6 years rather than 4,and the salvage at the end of the 6th year would be $1,500.Determine the depreciation expense for the truck for the 6 years of its life.

The depreciation method that allocates an equal portion of the total depreciable cost for a plant asset to each unit produced is called:

A company purchased and installed machinery on January 1 at a total cost of $93,000.Straight-line depreciation was calculated based on the assumption of a five-year life and no salvage value.The machinery was disposed of on July 1 of year four.The company uses the calendar year. 1.Prepare the general journal entry to update depreciation to July 1 in year four. 2.Prepare the general journal entry to record the sale of the machine for $27,000 cash.

A company purchased a weaving machine for $190,000.The machine has a useful life of 8 years and a residual value of $10,000.It is estimated that the machine could produce 75,000 bolts of woven fabric over its useful life.In the first year,15,000 bolts were produced.In the second year,production increased to 19,000 units. -Using the units-of-production method,what is the book value of the machine at the end of the second year?

The straight-line depreciation method and the double-declining-balance depreciation method:

Ordinary repairs meet all of the following criteria except:

Riverboat Adventures pays $310,000 plus $15,000 in closing costs to buy out a competitor.The real estate consists of land appraised at $35,000,a building appraised at $105,000,and paddleboats appraised at $210,000.Compute the cost that should be allocated to the building.

________ refers to a plant asset that is no longer useful in producing goods or services with a competitive advantage because of new inventions and improvements.

A company's property records revealed the following information about one of its plant assets: Calculate the depreciation expense in Year 1 and Year 2 for the year ended December 31.

Martin Company purchases a machine at the beginning of the year at a cost of $60,000.The machine is depreciated using the double-declining-balance method.The machine's useful life is estimated to be 4 years with a $5,000 salvage value. -Depreciation expense in year 4 is:

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000.The machine is depreciated using the double-declining-balance method. -The machine's useful life is estimated to be 5 years with a $4,000 salvage value.Depreciation expense in year 2 is:

A company's property records revealed the following information about its plant assets: Calculate the depreciation expense for each machine in Year 1 and Year 2 for the year ended December 31.

An asset can be disposed of by all of the following except:

Plant assets are used in operations and have useful lives that extend over more than one accounting period.

Phoenix Agency leases office space.On January 3,Phoenix incurs $65,000 to improve the leased office space.These improvements are expected to yield benefits for 8 years.Phoenix has 5 years remaining on its lease.Compute the amount of expense that should be recorded the first year related to the improvements.