Exam 10: Long -Term Assets

Drilling equipment with a ten-year useful life is used solely in conjunction with an oil well that has an eight-year life.The equipment should be depreciated over eight years using the production method.

In general,how does one determine whether or not an expenditure should be included in the acquisition cost of property,plant,and equipment?

Noncompete covenants should be amortized over the specified life of the contract.

Improperly classifying large expenditures as assets rather than expenses

According to generally accepted accounting principles,goodwill is recorded as an asset

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

The term used to describe the allocation of the cost of an intangible asset to the periods it benefits is

When a company can prove it is worth more than its balance sheet indicates,it may record some goodwill.

A tractor held by a farm equipment company for sale to farmers is classified as a long-term asset.

You purchased Company B for $220,000 on January 1,2014.Company B's assets were valued as follows: In addition,you opened a company bank account and deposited $30,000 cash.All liabilities were paid prior to the transfer of ownership.Create the balance sheet for Company B under your ownership.

A positive free cash flow means that a company has funds available to reduce debt or expand operations.

A copyright is obtained for what becomes a very successful book.The publisher expects the book to generate sales for ten years.The copyright should be

The cost to defend a patent successfully should be expensed in the period incurred.

If a company's free cash flow is $66,000,net cash flows from operating activities total $133,000,purchases of plant assets total $61,000,and the payment of dividends was $20,000,what amount was obtained from the sale of plant assets?

A capital expenditure will result in an immediate increase in 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

A natural resource is expensed in the year it is extracted rather than when it is sold.

The replacement of tires on a truck is considered an ordinary repair.

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

Horshack Mining Company purchases a gravel pit for $5,000,000.It estimates that 10,000,000 tons of gravel can be extracted over the pit's useful life.If 1,860,000 tons are extracted and sold during the first year,the entry to record depletion expense will include