Exam 11: Long Term Assets

Land held for speculative purposes should be classified as a long-term investment.

Natural resources are classified as intangible assets on the balance sheet.

Indicate whether each of the following expenditures should be classified as land (L), land improvements (LI), buildings (B), equipment (E), or none of these (X). _____ 1. Parking lots _____ 2. Electricity used by equipment _____ 3. Sewage system cost _____ 4. Interest on building construction loan _____ 5. Cost of trial runs for equipment _____ 6. Drainage costs _____ 7. Cost to install equipment _____ 8. Fences _____ 9. Unpaid (past) property taxes assumed _____ 10. Cost of tearing down a building when land and a building on it are purchased

The federal government grants patents for

Guilford Company's air-conditioning system has just completed the eighth year of an estimated ten-year life. The system cost $30,000 and now has accumulated depreciation of $24,000. At the beginning of the ninth year, the company expects to spend $8,000 on a complete renovation of the system and expects the total life of the system to be fifteen years. Neither the capacity of the system nor the residual value was increased. The company uses the straight-line method to determine depreciation. Determine the following: (a) the account debited for the cost of renovation, (b) the carrying value of the system after renovation, and (c) the depreciation expense for the ninth year.

A truck that cost $12,000 and on which $9,000 of accumulated depreciation has been recorded was disposed of on January 1. Assume that the truck was traded for a similar truck having a price of $13,000, that an $1,800 trade-in was allowed, and that the balance was paid in cash. The amount of the gain or loss recognized on this transaction would be

The following machines were purchased during 2010 : Machine A for $6,000 on April 5 Machine B for $4,000 on August 24 Machine C for $5,000 on November 10 Assuming that each machine has an estimated useful life of six years and a 10 percent residual value, calculate total depreciation expense for 2010 (assume straight-line depreciation and round to the nearest month and the company reports on a calendar-year basis).

Depreciation is a process of allocation, not of valuation.

A copyright should be amortized over the life of the author, plus 70 years.

Under tax depreciation, estimated useful life and residual value must be strictly adhered to.

Customer lists are classified as intangible assets.

The cost of land should include accrued property taxes paid by the purchaser.

A building was purchased for $500,000. It has accumulated depreciation of $80,000 and had a residual value of $100,000. Assuming the use of straight-line depreciation, its estimated useful life must have been

For each of the following descriptions, provide the name of the intangible asset that is being described. _______________ 1. Exclusive right to use a name or symbol _______________ 2. Exclusive right to sell photographic reproductions of a painting _______________ 3. Excess paid for a business over the fair market value of the net assets purchased _______________ 4. Long-term exclusive right to use certain property _______________ 5. A right to an exclusive territory or market _______________ 6. Exclusive right to use an invention to sell or manufacture a certain product or use a specific process

On January 1, a machine with a useful life of five years and a residual value of $3,000 is purchased for $15,000. What is the depreciation expense in year 3 under straight-line depreciation?

Research and development costs normally are capitalized and amortized over the estimated sales life of the product developed.

According to generally accepted accounting principles, the proper accounting treatment for the cost of a trademark that management feels will retain its value indefinitely is to

Starsky acquired a mine for $1,800,000 which has an estimated residual value of $300,000 and contains an estimated 1,500,000tons of coal. If 230,000 tons of coal are mined and sold during the first year, the entry to record the depletion charge is:

The exclusive right to sell a product within a certain geographic area is called a

The cost of equipment would include the cost of test runs to see that the equipment is operating properly.