Exam 9: Long-Term Assets

Gomez Company purchases a piece of equipment on Jan.2,2014,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 2014. -Using the production method and assuming 8,000 units are produced,is

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

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

Mercado 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. )

An asset was purchased for $100,000.It had an estimated residual value of $20,000 and an estimated useful life of ten years.After four years of use,the estimated residual value is revised to $14,000.Assuming straight-line depreciation,depreciation expense in year 5 of use would be

Overhauling a company's cooling system is an example of an extraordinary repair.

Which of the following costs normally is expensed in the year incurred,regardless of the extent of future benefit?

A revenue expenditure results in the immediate recognition of an expense.

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

Improvements to real estate are never subject to depreciation.

When a list of customers or subscribers is purchased,its cost is

A capital expenditure results in a debit to a(n)

Which of the following would be considered a revenue expenditure?

The cost of a long-term asset is expensed

In 2014,Mansfield Mining purchased a mineral deposit for $12,000,000.It is estimated that 15,000,000 tons can be extracted from the mine.Calculate depletion expense during 2014 assuming 800,000 tons were extracted and 700,000 tons were sold.

The purchased right to reproduce and sell a computer program is covered by which intangible?

When a fully depreciated asset with a residual value is discarded

Which of the following is not subject to depletion?

In the calculation of free cash flow,dividends and sales of plant assets are both deducted.

Free cash flow is a good measure of a company's ability to finance long-term assets.