Exam 8: Accounting for Long-Term Assets

On January 2,2010,a company purchased a delivery truck for $45,000 cash.The truck had an estimated useful life of seven years and an estimated salvage value of $3,000.The straight-line method of depreciation was used.Prepare the journal entries to record depreciation expense and the disposition of the truck on September 1,2014,under each of the following assumptions: a.The truck and $45,000 cash were given in exchange for a new delivery truck that had a cash price of $60,000.This transaction has commercial substance. b.The truck and $40,000 cash were exchanged for a new delivery truck that had a cash price of $60,000.This transaction has commercial substance.

Spears Co.had net sales of $35,400 million.Its average total assets for the period were $14,700 million.Spears' total asset turnover equals:

A company had a tractor destroyed by fire.The tractor originally cost $85,000 with accumulated depreciation of $60,000.The proceeds from the insurance company were $20,000.The company should recognize:

Define plant assets and identify the four primary issues in accounting for them.

________ 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.

Revenue expenditures are also called balance sheet expenditures.

A company's property records revealed the following information about its plant assets: Machine No. Cost Salvage Value Purchase Date Estimated Life Depreciation Method 1 \ 82,000 \ 8,000 1/01 4 years Straight-line 2 46,000 3,600 7/01 5 years Double-declining balance Calculate the depreciation expense for each machine in Year 1 and Year 2 for the year ended December 31. Machine 1: Year 1 $\underline{\quad\quad\quad\quad}$ $\quad$ $\quad$ Year 2 $\underline{\quad\quad\quad\quad}$ Machine 2: Year 1 $\underline{\quad\quad\quad\quad}$ $\quad$ $\quad$ Year 2 $\underline{\quad\quad\quad\quad}$

An asset's cost includes all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use.

A leasehold refers to the rights the lessor grants to the lessee under the terms of the lease.

Westport Company reports the following in millions: net sales of $25,300 for 2016 and $22,640 for 2015; end-of-year total assets of $14,875 for 2016 and $13,680 for 2015.Compute its total asset turnover for 2016 and assess its level if competitors average a total asset turnover of 2.0 times.

On January 1,a company purchased machinery for $75,000 that had a 6-year useful life and a salvage value of $6,000.After three years of straight-line depreciation,the company paid $8,500 cash at the beginning of the year to improve the efficiency of the machinery.The productivity of the machinery was improved without increasing its remaining useful life or changing its salvage value.Straight-line depreciation is used throughout the machinery's life. 1.Prepare the journal entry to record the $8,500 expenditure. 2.Prepare the journal entry to record depreciation expense for the fourth year.

Additional costs of plant assets that do not materially increase the asset's life or productive capabilities are recorded as ________.

The relevant factors in computing depreciation do not include:

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. -Compute the depletion expense for the first year assuming 38,000 tons were removed and sold.

Revising an estimate of the useful life or salvage value of a plant asset is referred to as a change in accounting estimate and is reflected in the current,and future financial statements.

On April 1 of the current year,a company traded an old machine that originally cost $32,000 and that had accumulated depreciation of $24,000 for a similar new machine that had a cash price of $40,000. 1.Prepare the entry to record the exchange under the assumption that a $5,000 trade-in allowance was received and the balance of $35,000 was paid in cash.Assume the exchange transaction had commercial substance. 2.Prepare the entry to record the exchange under the assumption that instead of a $5,000 trade-in allowance,a $12,500 trade-in allowance was received and the balance of $27,500 was paid in cash.Assume the exchange transaction has commercial substance.

Victory Company purchases office equipment at the beginning of the year at a cost of $15,000.The machine is depreciated using the straight-line method.The machine's useful life is estimated to be 7 years with a $1,000 salvage value. -The journal entry to record the first year's depreciation is:

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000.The machine is depreciated using the straight-line method.The machine's useful life is estimated to be 5 years with a $4,000 salvage value. -The book value of the machine at the end of year 2 is:

Explain the difference between revenue expenditures and capital expenditures and how they are recorded in the accounting system.

Match each of the following terms with the appropriate definitions. -The process of allocating the cost of a natural resource to the period when it are consumed.