Exam 11: Long Term Assets

A truck is purchased for $35,000. It has a five-year life and a $5,000 residual value. Under the double-declining-balance method, what is the accumulated depreciation after two years?

Extraordinary repairs usually are recorded by making a debit to

On January 1, 2009, Pung Manufacturing Company purchased for $94,000 a machine that will produce an estimated 75,000 units of Product X. The machine has an estimated useful life of five years and an estimated residual value of $4,000. Calculate the following amounts: (a) the carrying value of the machine after it has been used for three and one-half years, under the straight-line method; (b) depreciation expense for 2010, under the production method (assume that 13,000 units were produced that year); and (c) accumulated depreciation at the end of 2010, under the double-declining-balance method. (Show your work.)

Which of the following is subject to depletion?

A revenue expenditure results in a

Marcus Photography purchased photographic equipment for $75,000. The equipment was to be used for ten years and had a $5,000 estimated residual value. After the company took three years of straight-line depreciation, it decided that the equipment would instead have a $2,000 residual value and a total useful life of eleven years. Calculate depreciation expense that should be recorded in year 4. (Show your work.)

All of the following are used in estimating a depreciable asset's useful life except

If a capital expenditure is incorrectly recorded on a company's books as a revenue expenditure, which of the following statements will be true?

When disposing of equipment, Accumulated Depreciation is debited for the existing carrying value.

Under what circumstances will a loss be recorded on the sale of equipment, and what effect will the loss have on stockholders' equity?

Depreciation for tax purposes is identical to depreciation for financial reporting purposes.

A building not currently used because economic conditions have limited a company's expansion is classified properly as property, plant, and equipment.

Gain on Sale of Machinery is recorded as a debit.

A building was purchased for $232,000. It currently has accumulated depreciation of $40,000 and had a residual value of $50,000. Assuming the use of straight-line depreciation, its estimated useful life must have been

A machine that cost $36,000 and on which $26,000 of depreciation had been recorded was disposed of for $10,400. Indicate whether a gain or a loss should be recorded, and for what amount.

Bob Quinn is in the gravel business and has engaged you to assist in evaluating his company, Quinn Gravel Company. Your first step is to collect the facts about the company's operations. On January 3, 2010, Bob purchased a piece of property with gravel deposits for $3,155,000. He estimated that the gravel deposits contained 4,700,000 cubic yards of gravel. The gravel is used for making roads. After the gravel is gone, the land, which is in the desert, will be worth only about $100,000. The equipment required to extract the gravel cost $726,000. In addition, Bob had to build a small frame building to house the mine office and a small dining hall for the workers. The building cost $76,000 and will have no residual value after its estimated useful life of ten years. It cannot be moved from the mine site. The equipment has an estimated useful life of six years (with no residual value) and also cannot be moved from the mine site. Trucks for the project cost $154,000 (estimated life, six years; residual value, $10,000). The trucks, of course, can be used at a different site. Bob estimated that in five years all the gravel would be mined and the mine would be shut down. During 2010, 1,175,000 cubic yards of gravel were mined. The average selling price during the year was $1.33 per cubic yard, and at the end of the year 125,000 cubic yards remained unsold. Operating expenses were $426,000 for labor and $116,000 for other expenses. a. Prepare adjusting entries to record depletion and depreciation for the first year of operation (2010). Assume that the depreciation rate is equal to the percentage of the total gravel mined during the year, unless the asset is movable. For movable assets, use the straight-line method. (Omit explanations.) b. Prepare an income statement for 2010 for Quinn Gravel Company. c. What is your evaluation of the company's operations? Explain your evaluation and offer suggestions. Ignore income tax effects.

Which of the following assets is not subject to depreciation, depletion, or amortization?

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 930,000 tons are extracted and sold during the first year, the entry to record depletion expense is : ord this event is

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 production method and assuming that 8,000 units are produced, is

Danny's Delivery Service purchased a delivery van for $30,000. The van had an estimated useful life of six years and an estimated residual value of $6,000. After four years of use, the total estimated useful life is revised to seven years. Assuming straight-line depreciation, depreciation expense in year 5 would be (amounts rounded)