Exam 8: Accounting for Long-Term Assets

Fortune Drilling Company acquires a mineral deposit at a cost of $5,900,000.It incurs additional costs of $600,000 to access the deposit,which is estimated to contain 2,000,000 tons and is expected to take 5 years to extract. -What journal entry would be needed to record the expense for the first year assuming 418,000 tons were mined?

A company purchased equipment on June 28 of the current year and placed it in service on August 1.The following costs were incurred in acquiring the equipment: Purchase (invoice) price \ 215,600 Transportation 1,400 Insurance during shipping 200 One-year fire insurance beginning August 1 of the current year 1,200 Installation cost 4,500 Raw materials and direct labor used to test the equipment. 1,500 Determine the amount to be recorded as cost for the equipment.

On September 30 of the current year,a company acquired and placed in service a machine at a cost of $700,000.It has been estimated that the machine has a service life of five years and a salvage value of $40,000.Using the double-declining-balance method of depreciation,complete the schedule below showing depreciation amounts for all six years (round answers to the nearest dollar).The company closes its books on December 31 of each year.

Since goodwill is an intangible asset,it is amortized each year using the straight-line method.

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

If an asset is sold above its book value,the selling company records a loss.

Holding a copyright:

Crestfield leases office space for $7,000 per month.On January 3,the company incurs $12,000 to improve the leased office space.These improvements are expected to yield benefits for 10 years.Crestfield has 4 years remaining on its lease.What journal entry would be needed to record the expense for the first year related to the improvements?

Hunter Sailing Company exchanged an old sailboat for a new one.The old sailboat had a cost of $160,000 and accumulated depreciation of $100,000.The new sailboat had an invoice price of $270,000.Hunter received a trade in allowance of $70,000 on the old sailboat,which meant the company paid $200,000 in addition to the old sailboat to acquire the new sailboat.If this transaction has commercial substance,what amount of gain or loss should be recorded on this exchange?

One characteristic of plant assets is that they are:

To capitalize an expenditure is to:

Revenue expenditures,also called income statement expenditures,are additional costs of plant assets that do not materially increase the assets' life or productive capabilities.

The term inadequacy,as it relates to the useful life of an asset,refers to:

A company made the following expenditures in connection with the construction of a new building: Architect's fees \ 12,000 Cash paid for land and unusable building on the land 300,000 Removal of old building 18,000 Salvage from sale of old building materials (4,000) Construetion survey 1,500 Legal fees for title search 3,000 Excavation for basement construction 25,000 Machinery purchased for operations 100,000 Storage and delivery charges on machinery because building Was not ready when machinery was delivered 900 Freight on machinery purchased 1,600 Construction costs of new building 1,000,000 Tnstallation of machinery 2,500 Prepare a schedule showing the amounts to be recorded as Land,Buildings,and Machinery.

The depreciation method that recognizes equal amounts of annual depreciation over the life of an asset is ________.

Explain the purpose of and method of depreciation for partial years.

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. -Determine the machines' second year depreciation under the units-of-production method.

The useful life of a plant asset is:

Betterments are:

Explain how to calculate total asset turnover.Describe what it reveals about a company's financial condition,whether a higher or lower ratio is desirable,and how it is best applied for comparative purposes.