Exam 8: Accounting for Long-Term Assets

Marlow Company purchased a point of sale system on January 1 for $3,400.This system has a useful life of 10 years and a salvage value of $400.What would be the depreciation expense for the first year of its useful life using the double-declining-balance method?

Edmond reported average total assets of $9,965 million and net sales of $10,430 million.Its total asset turnover equals .96.

Obsolescence refers to the insufficient capacity of a company's plant assets to meet the company's growing productive demands.

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.

A company purchased mining property for $1,837,500 containing an estimated 7,350,000 tons of ore.In Year 1,it mined and sold 857,000 tons of ore.Calculate the depletion expense for Year 1 and prepare the journal entry to record the depletion.

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.

Compare the different depreciation methods (straight-line,units-of-production,and double-declining-balance)with respect to the amounts of depreciation expense per period and the total depreciation over the life of the asset.

An asset's book value is $18,000 on December 31,Year 5.The asset has been depreciated at an annual rate of $3,000 on the straight-line method.Assuming the asset is sold on December 31,Year 5 for $15,000,the company should record:

Martinez owns machinery that cost $87,000 with accumulated depreciation of $40,000.The company sells the machinery for cash of $42,000.The journal entry to record the sale would include:

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.

Match each of the following terms with the appropriate definitions. -Major repairs that extend the useful life of a plant asset beyond its original estimate.

A total asset turnover ratio of 3.5 indicates that:

What is depreciation of plant assets? What are the factors necessary in computing depreciation?

Match each of the following terms with the appropriate definitions. -The insufficient capacity of plant assets to meet the company's productive demands.

The federal income tax rules for depreciating assets are known as ________.

Match each of the following terms with the appropriate definitions. -Certain nonphysical assets used in operations that confer long-term rights,privileges,or competitive advantages on their owners.

Total asset turnover is calculated by dividing average total assets by net sales.

When originally purchased,a vehicle costing $23,000 had an estimated useful life of 8 years and an estimated salvage value of $3,000.After 4 years of straight-line depreciation,the asset's total estimated useful life was revised from 8 years to 6 years and there was no change in the estimated salvage value.The depreciation expense in year 5 equals:

Match each of the following terms with the appropriate definitions. -A depreciation method that charges a varying amount to expense for each period of an asset's useful life depending on its usage.

A company sold equipment that originally cost $100,000 for $60,000 cash.The accumulated depreciation on the equipment was $40,000.The company should recognize a: