Exam 8: Accounting for Long-Term Assets

A company exchanged an old automobile for a newer model.The old automobile account had a cost of $36,000 and accumulated depreciation of $25,000 as of the exchange date.The new automobile had a cash price of $34,000,but the company was given a $15,000 trade-in allowance and the balance of $19,000 was paid in cash.Prepare the journal entry to record the exchange,if the transaction has commercial substance.

The modified accelerated cost recovery system (MACRS):

Match each of the following terms with the appropriate definitions. -An expenditure that makes a plant asset more efficient or productive.

Intangible assets are nonphysical assets used in operations that confer on their owners' long-term rights,privileges,or competitive advantages.

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

Match each of the following terms with the appropriate definitions. -The process of systematically allocating the cost of an intangible asset to expense over its estimated useful life.

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:

The phrase capital-intensive refers to companies with large amounts invested in plant assets.

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. -The machine's book value at the end of year 3 is:

What are some of the variables that make a plant asset's useful life difficult to predict?

Describe the accounting for natural resources,including their acquisition,cost allocation,and account titles.

A company purchased a plant asset for $60,000.The asset has an estimated salvage value of $4,000,and an estimated useful life of 7 years.The annual depreciation expense using the straight-line method is $4,000 per year.

A company purchased a mineral deposit for $800,000.It expects this property to produce 120,000 tons of minerals and to have a salvage value of $50,000.In the current year,the company mined and sold 9,000 tons of minerals.Its depletion expense for the current period equals:

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 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 amount of depreciation expense that should be recorded for the second year?

Gaston owns equipment that cost $90,500 with accumulated depreciation of $61,000.Gaston asks $30,000 for the equipment but sells the equipment for $26,000.Which of the following would not be part of the journal entry to record the disposal of the equipment?

Once the estimated depreciation expense for an asset is calculated:

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

A benefit of using an accelerated depreciation method is that:

The straight-line depreciation method yields a steady pattern of depreciation expense.