Exam 10: Property,plant and Equipment,and Intangibles

During 2014,Storey Company acquired a new computer with a cash price of $12,800 by exchanging an old one on which Storey received a $1,500 trade-in.The old computer had cost $9,000 and its accumulated depreciation to the date of exchange was $5,500.This transaction has commercial substance.Prepare the journal entry to record the exchange.

Ordinary repairs:

Explain the difference between revenue and capital expenditures and how they are recorded in the accounting system.

The original cost of an asset minus accumulated depreciation is called:

A method that allocates an equal portion of the total depreciation for a property,plant and equipment asset to each unit produced is called:

Natural resources:

Dersch Co.purchased a machine on January 1,2014,for $1,500,000.Using the table below,calculate the annual depreciation expense for each year of the machine's life (estimated at 5 years or 50,000 hours with a residual value of $150,000).During the machine's life it was used 15,000; 14,000; 10,000; 9,000; and 6,000 hours.

On July 1,2014,Delta Company purchased and placed in service a machine with a cost of $340,000.Delta estimated the service life to be 6 years or 60,000 units of output,with an estimated residual value of $80,000.During 2014,15,000 units were produced. Prepare the necessary December 31,2014,adjusting journal entry to record depreciation for 2014 assuming Delta uses the double-declining-balance method to the nearest whole month.

Goodwill is written down to its fair value if the fair value is less than its carrying value.

On July 1,2014,Delta Company purchased and placed in service a machine that cost $360,000.Delta estimated the service life to be 5 years or 25,000 units of output,with an estimated residual value of $6,000.During 2014,2,600 units were produced. Prepare the necessary December 31,2014,adjusting journal entry to record depreciation assuming Delta uses: (a)The straight-line method of depreciation. (b)The units-of-production method of depreciation.

SportsWorld bought a new display case for $12,000 and was given a trade-in of $2,000 on an old display case.The old case had an original cost of $7,000 and accumulated depreciation of $4,000 to the date of trade-in.SportsWorld should record the new display case at:

The $60,000 original cost of a machine is recorded in an account called Old Machine.After $45,000 of depreciation was recorded,the machine was traded in on a new machine with a cash price of $85,000.A $10,500 trade-in allowance was received on the old machine and the balance was paid in cash.This transaction has commercial substance.Prepare the general journal entry to record the trade; the cost of the new machine should be debited to a New Machine account.

Machinery having a four-year useful life and a residual value of $5,000 was acquired for $65,000 cash on June 28.Using the nearest whole month method,the company would recognize $11,250 for depreciation expense at the end of the first year,December 31.

Companies are required to use the straight line depreciation method for tax purposes because this method yields the lowest depreciation expense and results in the highest payment of tax.

RoboCop Company paid $31,400 for a machine that was expected to last 5 years and have a residual value of $5,000. During the fourth year of the machine's life,$5,400 was paid for repairs that were expected to increase the service life of the machine from 5 to 7 years.Prepare the general journal entry to record this transaction.

On October 1 of this year,SportsWorld purchased a delivery van for $23,000 with a residual value of $3,000.The van has an estimated useful life of 5 years.Using straight-line depreciation and the half-year rule,how much depreciation expense should SportsWorld recognize on December 31 of this year?

Inadequacy refers to:

The double-declining balance method is applied by (1)calculating the asset's straight-line depreciation rate,(2)doubling it,(3)subtracting residual value from cost,and (4)multiplying the rate times the cost.

On January 2,2015,Mullins Company purchased a delivery truck for $45,000 cash.The truck had an estimated useful life of seven years and an estimated residual value of $3,000.Straight-line depreciation was used. Assuming the transactions have commercial substance,prepare the journal entries to record the disposition of the truck on September 1,2019,under each of the following assumptions: (a)The truck and $55,000 cash were exchanged for equipment that had a fair value of $70,000. |(b)The truck and $40,000 cash were exchanged for a new delivery truck that had a fair value of $70,000.

Revenue expenditures: