Exam 6: Accounting for Long-Term Operational Assets

What factors affect the amount of depreciation recorded on a building in a given year?

Explain the meaning of the terms "tangible" and "intangible" and discuss how these terms are used in describing assets.

On January 6,2012,the Eldorado Corporation purchased a tract of land for a factory site for $500,000.An existing building on the site was demolished and the new factory was completed on October 11,2012.Additional cost data are shown below: Which of the following correctly states the cost that should be recorded for (a)the land and (b)the new building?

Rouse Company owned an asset that had cost $32,000.The company sold the asset on January 1,2012 for $8,000.Accumulated depreciation on the day of sale amounted to $26,000.Based on this information,the sale would result in:

A substantial amount spent to improve the quality or extend the life of a long-term asset is a revenue expenditure.

Which of the following is considered an accelerated depreciation method?

Using straight line depreciation,determine the amount of depreciation expense and the amount of accumulated depreciation that would appear on the December 31,2012 financial statements.

Accumulated Depreciation is a temporary account that is closed each year.

Which of the following measurements would not be affected by the choice of depreciation methods?

Zabrinski Company purchased oil rights on July 1,2012 for $3,200,000.If 200,000 barrels of oil are expected to be extracted over the asset's life and 30,000 barrels are extracted and sold in 2012,the amount of depletion expense recorded on December 31,2012 would be:

Gains and losses are reported as non-operating items on the income statement.

On January 1,2012,Studer Corporation paid $6,000 for major improvements on a two-year-old machine.Although the expenditure did not change the expected useful life,it greatly increased the productivity of the machine.Prior to this transaction,the Machine account in the general ledger was listed at $32,000 and the balance in Accumulated Depreciation was $10,000.Studer uses the straight-line depreciation method.After the improvements,the estimated remaining useful life was four years,and the estimated salvage value was $2,000. Required: a)How would the transaction on January 1,2012 affect Studer's financial statements? What type of transaction was this (asset source,asset use,asset exchange,or claims exchange)? b)Immediately after the January 1,2012 transaction,what is the book value of the asset on Studer's books? c)Compute the depreciation for the machine for the year 2012.

Laurens Company purchased equipment that cost $10,000 on January 1,2012.The asset had an expected useful life of five years and an estimated salvage value of $2,000.Laurens uses the straight-line method for the recognition of depreciation expense.At the beginning of the fourth year of usage,the company revised its estimated salvage value to $1,000.Based on this information,the amount of depreciation expense to be recognized at the end of 2015 is:

Which of the following would most likely not be depreciated or amortized using the straight-line method?

Muller Corporation purchased a new truck on January 1,2012 for $55,000 cash.Muller estimated the truck would have a salvage value of $4,000 at the end of the useful life of 5 years.On January 2,2014 Muller had to replace the engine of the truck paying $7,500 cash.Due to the replaced engine,Muller estimates that the truck will continue a productive life for another four years. Required: Assuming straight-line depreciation is used,calculate the depreciation expense for 2014.

On May 4,2012,Regan Company purchased a tract of land as a factory site for $3,000,000.An existing building on the property was demolished,and construction was begun on a new factory building in July 2012 and completed December 15,2012.Cost data are shown below. Required: Compute the amounts that should be recorded as the cost of a)the land and b)the new factory building.

On January 1,2012,Rowley Company purchased a truck that cost $22,000.The truck had an expected useful life of 5 years and a $4,000 salvage value.The amount of depreciation expense recognized in 2012 assuming that Rowley uses the double declining balance method is:

In 2012,Albert Mining Co.purchased a coal mine that contained an estimated 1,000,000 tons of coal for a cash price of $7,500,000.The company mined 250,000 tons of coal in 2012. Required: a)What is the depletion charge per ton of coal? b)What is the amount of depletion expense for 2012?

Different depreciation methods affect the total amount of depreciation that can be taken over an asset's useful life.

An asset purchased for $14,000 that had a $4,000 salvage and a 4-year life was depreciated using straight line depreciation for two years.At the beginning of the third year,the total useful life of the asset is revised to 5 years.Show how the revised depreciation expense will affect the financial statements.