Question 1

Explain in detail how to compute each of the following depreciation methods: straight-line, units-of-production, and double-declining-balance.

Accepted Answer

Straight-line depreciation is calculated

Question 2

No gain or loss is recorded for exchanges of plant assets without commercial substance.

Accepted Answer

A) True 
 B)False

Question 3

The following information is available on a depreciable asset owned by Mutual Savings Bank: $$\begin{array} { | l | l | } 
\hline \text { Purchase date } & \text { July l, Year l } \
\hline \text { Purchase price } & \$ 85,000 \
\hline \text { Salvage value } & \$ 10,000 \
\hline \text { Useful life } & 10 \text { years } \
\hline \text { Depreciation method } & \text { straight-line } \
\hline
\end{array}$$ The asset's book value is $70,000 on July 1, Year 3. On that date, management determines that the asset's salvage value should be $5,000 rather than the original estimate of $10,000. Based on this information, the amount of depreciation expense the company should recognize during the last six months of Year 3 would be:

Accepted Answer

A)  $3,750.00 
B)  $4,062.50 
C)  $7,375.00 
D)  $7,812.50 
E)  $8,125.00 
A)  $3,750.00 
B)  $4,062.50 
C)  $7,375.00 
D)  $7,812.50 
E)  $8,125.00

Question 4

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

Accepted Answer

Partial years' depreciation is often req

Question 5

Capital expenditures that extend an asset's useful life beyond its original estimate are called________.

Accepted Answer

extraordin

Question 6

Plant assets refer to nonphysical assets that are used in the operations of a business.

Accepted Answer

A) True 
 B)False

Question 7

Additional costs of plant assets that provide benefits extending beyond the current period; they increase or improve the type or amount of service an asset provides are treated as ________.

Accepted Answer

capital ex

Question 8

Gain or loss on the disposal of assets is determined by comparing the disposed asset's book value to the market value of any assets received.

Accepted Answer

A) True 
 B)False

Question 9

Prepare journal entries to record the following transactions of a company during the current year:
Mar 1 Purchased a truck for $40,000 with a 5-year useful life and a $5,000 salvage value. Also paid 6% sales tax, $350 for the annual truck license, $300 to paint the truck with the company's colors and name, and $1,500 for maintenance supplies for the future. All payments were in cash. Mar 10 Purchased a garage from a neighboring business with a 7%, 4-year, $67,000 note. The seller's book value for the garage was $42,750. The estimated remaining useful life of the garage is 10 years.
July 5 Paid $800 cash to replace (uninsured) garage windows broken during a storm.
Aug 25 Purchased used shop equipment for $10,700 cash. Sales tax was $825, freight costs $250,
$3,200 for a special base to house the equipment, and reconditioning costs $900, all of which were paid in cash. The estimated useful life of the equipment is 3 years and salvage value is $500.
Oct 5 Purchased office equipment for $11,500 cash. Paid $1,290 in sales tax, $550 for repairs incurred from damage during installation, and $2,200 for supplies to be used for periodic preventive maintenance. The estimated useful life of the equipment is 8 years and salvage value is $1,200.

Accepted Answer

None

Question 10

A company's old machine that cost $40,000 and had accumulated depreciation of $22,000 was traded in on a new machine having an estimated 20-year life with an invoice price of $45,000. The company also paid $33,000 cash, along with its old machine to acquire the new machine. If this transaction has commercial substance, the new machine should be recorded at:

Accepted Answer

A)  $51,000. 
B)  $18,000. 
C)  $40,000. 
D)  $33,000. 
E)  $45,000. 
A)  $51,000. 
B)  $18,000. 
C)  $40,000. 
D)  $33,000. 
E)  $45,000.

Question 11

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:

Accepted Answer

A)  Debit Depreciation Expense $2,000, credit Accumulated Depreciation $2,000. 
B)  Debit Office Equipment $2,000, credit Accumulated Depreciation $2,000. 
C)  Debit Depreciation Expense $2,000, credit Office Equipment $2,000. 
D)  Debit Depreciation Expense $2,143, credit Accumulated Depreciation $2,143. 
E)  Debit Accumulated Depreciation $2,143; credit Office Equipment $2,143. 
A)  Debit Depreciation Expense $2,000, credit Accumulated Depreciation $2,000. 
B)  Debit Office Equipment $2,000, credit Accumulated Depreciation $2,000. 
C)  Debit Depreciation Expense $2,000, credit Office Equipment $2,000. 
D)  Debit Depreciation Expense $2,143, credit Accumulated Depreciation $2,143. 
E)  Debit Accumulated Depreciation $2,143; credit Office Equipment $2,143.

Question 12

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:

Accepted Answer

A)  $15,000. 
B)  $55,000. 
C)  $0. 
D)  $60,000. 
E)  $13,750. 
A)  $15,000. 
B)  $55,000. 
C)  $0. 
D)  $60,000. 
E)  $13,750.

Question 13

Match between columns
                        Premises:  The amount by which the company's value exceeds the value of its individual assets and liabilities.
 A cost reported as an expense on the current income statement because it does not provide a material benefit in future periods.
 An expenditure that makes a plant asset more efficient or productive.
 A method of depreciation that yields larger expense during the early years of an asset's life and smaller expense in the later years.
 Expenditures to keep a plant asset in normal, good operating condition.
 The process of allocating the cost of a natural resource to the period when it are consumed.
 A measure of a company's effectiveness in using its assets to generate sales.
 The process of systematically allocating the cost of an intangible asset to expense over its estimated useful life.
 A depreciation method that charges a varying amount to expense for each period of an asset's useful life depending on its usage.
 Certain nonphysical assets used in operations that confer long-term rights, privileges, or competitive advantages on their owners.

Accepted Answer

The Answer of Depletion and Betterment and Ordinary repairs and is...

Question 14

A loss on disposal of a plant asset occurs if the cash proceeds received from the asset sale is less than the asset's book value.

Accepted Answer

A) True 
 B)False

Question 15

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.
- Compute the depletion expense for the first year assuming 418,000 tons were mined.

Accepted Answer

A)  $1,180,000. 
B)  $1,280,000. 
C)  $1,300,000. 
D)  $1,358,500. 
E)  $1,233,100. 
A)  $1,180,000. 
B)  $1,280,000. 
C)  $1,300,000. 
D)  $1,358,500. 
E)  $1,233,100.

Question 16

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.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Depreciation:

Accepted Answer

A)  Measures the decline in market value of an asset. 
B)  Measures physical deterioration of an asset. 
C)  Is the process of allocating the cost of a plant asset to expense. 
D)  Is applied to land. 
E)  Is an outflow of cash from the use of a plant asset. 
A)  Measures the decline in market value of an asset. 
B)  Measures physical deterioration of an asset. 
C)  Is the process of allocating the cost of a plant asset to expense. 
D)  Is applied to land. 
E)  Is an outflow of cash from the use of a plant asset.

Question 19

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

Accepted Answer

MACRS (Mod

Question 20

The depreciation method that charges the same amount of expense to each period of the asset's useful life is called:

Accepted Answer

A)  Units-of-production depreciation. 
B)  Modified accelerated cost recovery system (MACRS) depreciation. 
C)  Accelerated depreciation. 
D)  Declining-balance depreciation. 
E)  Straight-line depreciation. 
A)  Units-of-production depreciation. 
B)  Modified accelerated cost recovery system (MACRS) depreciation. 
C)  Accelerated depreciation. 
D)  Declining-balance depreciation. 
E)  Straight-line depreciation.

Exam 10: Plant Assets Natural Resoures and Intangibles

Explain in detail how to compute each of the following depreciation methods: straight-line, units-of-production, and double-declining-balance.

No gain or loss is recorded for exchanges of plant assets without commercial substance.

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

Capital expenditures that extend an asset's useful life beyond its original estimate are called________.

Plant assets refer to nonphysical assets that are used in the operations of a business.

Additional costs of plant assets that provide benefits extending beyond the current period; they increase or improve the type or amount of service an asset provides are treated as ________.

Gain or loss on the disposal of assets is determined by comparing the disposed asset's book value to the market value of any assets received.

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:

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:

A loss on disposal of a plant asset occurs if the cash proceeds received from the asset sale is less than the asset's book value.

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.

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

Depreciation:

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

The depreciation method that charges the same amount of expense to each period of the asset's useful life is called:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

Filters