Exam 11: Long Term Assets

A machine was purchased for $30,500. It has a current carrying value of $18,000 and had a depreciable cost of $25,000. Its estimated residual value must have been

If the net present value of a long-term asset under consideration for purchase is negative, then the asset should not be purchased.

Office furniture was purchased for $14,000. It had an estimated residual value of $2,000 and has a current carrying value of $6,000. Its depreciable cost must have been

Inventory is classified as a long-term asset.

The cost of assets acquired for a lump sum should be allocated equally among the acquired assets.

Salvage value is not the same as

Residual value is not relevant when calculating double-declining-balance depreciation.

Kotter Mining Company purchases a gravel pit for $2,500,000. It estimates that 5,000,000 tons of gravel can be extracted over the pit's useful life. If 1,000,000 tons are extracted during the first year but only 720,000 tons are sold, what amount should be recorded for Gravel Inventory and Accumulated Depletion, respectively?

Lester Company purchases a piece of equipment on Jan. 2, 2010, for $30,000. The equipment has an estimated life of eight years or 50,000 units of production and an estimated residual value of $3,000. Lester uses a calendar fiscal year. The entry to record the amount of depreciation for 2010, using the double-declining-balance method, is

The primary difference between ordinary and extraordinary repairs is that extraordinary repairs

Match each of the following terms with the descriptions below by supplying the letter of the correct term. a. Leasehold b. Trademark c. Copyright h. Noncompete covenant d. Patent i. Franchise e. Customer list f. Goodwill g. Software h. Noncompete covenant i. Franchise j. Research and development ___ 1. The amount paid for a business in excess of its fair market value ___ 2. A registered symbol or name to identify a product or service ___ 3. An exclusive right for 20 years to produce a particular product ___ 4. A contract restricting the rights of others to operate in a specific industry ___ 5. A right to occupy land or buildings under a long-term rental contract ___ 6. An exclusive right to sell literary, artistic, or musical works and computer software ___ 7. Capitalized costs associated with computer programs developed for sale, lease, or internal use ___ 8. A right to an exclusive territory or market ___ 9. A planned search for a new product, as well as pure research ___ 10. Access to the names of subscribers or patrons

A debit to Accumulated Depreciation will increase the carrying value of an asset.

Leasehold improvements become the property of the lessor at the end of the lease.

A contract limiting the rights of others to go into business in a specific industry or line of business for a specified period is called a

Which of the following is not classified properly as property, plant, and equipment?

The costs associated with the development of software, for sale or internal use, should be expensed in the period incurred.

Group depreciation is an appropriate method for a large company calculating depreciation on office equipment.

Indicate whether each of the following items normally would be considered a capital expenditure (C) or a revenue expenditure (R). _____ 1. Replacement of shake roof with tile roof _____ 2. Cost to replace light bulbs _____ 3. Window-cleaning costs _____ 4. Cost to rebuild company vehicle engine _____ 5. Cost to construct parking lot _____ 6. Cost of a wastebasket

The basic accounting problems associated with accounting for long-term assets are similar to those of short-term assets.

The depletion calculation is similar to which of the following depreciation methods?