Exam 10: Long -Term Assets

Which of the following is the proper formula for computing free cash flow?

Discuss the difference between the successful efforts and full-costing methods of accounting for oil and gas resources.What type of company is most likely to use each method?

Failure to record depletion for a given accounting period will result in

A revenue expenditure results in the recognition of an asset.

On January 1,2014,Huan 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 2015,under the production method (assume that 13,000 units were produced that year);and (c)accumulated depreciation at the end of 2015,under the double-declining-balance method.(Show your work. )

Suppose an accounting intern mistakenly calculated depreciation expense on the Land account.She assigned it a 50-year life and a residual value of $10,000,000.Using the cost of the land (assume it was $811,000,000)and the straight-line method of depreciation,discuss the dollar effect of this error on pretax earnings and total assets.

Gonzalez Printing purchased a new printing press for $80,000.It depreciates the press over a five-year period,using the double-declining-balance method of depreciation.If the press has an $8,000 estimated residual value,calculate depreciation expense for each of the five years.(Show your work. )

Which of the following is irrelevant in computing a machine's depreciation expense using the production method?

Grannis Corporation purchased land adjacent to its plant to improve access for trucks making deliveries.Expenditures incurred by the company were as follows: purchase price,$40,000;broker's fees,$7,000;title search and other fees,$6,000;demolition of an old building on the property,$3,700;grading,$1,200;digging foundation for the road,$3,000;laying and paving driveway,$25,000;lighting,$7,500;signs,$1,500.List the items and the amounts that should be included in the cost of the land and recorded in the Land account.

Book value is another term for carrying value.

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

Which of the following would be considered a capital expenditure?

A capital expenditure is an expenditure that benefits only the current accounting period.

Mineral deposits are subject to a process called depletion.

Equipment is purchased for $60,000.It has a five-year useful life and a $10,000 residual value.Under the double-declining-balance method,what is the depreciation expense for year 3?

The following machines were purchased during 2014: 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 2014 (assume straight-line depreciation and round to the nearest month and the company reports on a calendar-year basis).

Federal tax law does not allow the rapid write-off of plant assets.

A truck is purchased for $70,000.It has a five-year life and a $10,000 residual value.Under the straight-line method,what is the asset's carrying value after three years?

Which of the following would not be included in the cost of land?

The cost of tearing down a building on land just purchased should be