Exam 6: Accounting for Long-Term Operational Assets

With an accelerated depreciation method,an asset can be depreciated below its salvage value.

If Desmet Company had used the double-declining balance depreciation method,the depreciation expense appearing on the 2012 income statement would be:

In January 2012,Rogers Co.purchased a machine that cost $65,000.The equipment is estimated to have a 5-year life and a salvage value of $15,000. Required: a)Compute the amount of depreciation expense for 2012 and 2013 using the double declining balance method. b)How does salvage value affect the calculation of depreciation by the double declining balance method?

The recognition of depletion expense acts to

Sweetwater Company paid cash to prolong the useful life of one of its assets.Which of the following choices accurately reflects how this event would affect Sweetwater's financial statements?

Define "accelerated depreciation method" and give an example of such a method.

Parker Company purchased Eynon Corporation in 2009,recording $80,000 in goodwill at the time of purchase.In January,2014,Parker decides that the value of the goodwill has declined substantially due to local economic and demographic changes.Parker estimates that the true value of the goodwill should only be $30,000.Which of the following shows the effect of this situation on the financial statements?

Rembrandt Company purchased an asset on January 1,2009 for $100,000.The asset had a $20,000 salvage value and a 10 year life.The asset was sold on January 1,2012 for $80,000.Show how the sale will affect Rembrandt's financial statements,assuming that Rembrandt uses straight-line depreciation.

Which of the following statements is correct regarding accounting treatment of goodwill?

Which of the following terms is applied to long-term assets that have no physical substance and provide rights,privileges and special opportunities to businesses?

Give two examples of natural resources.

Assume that Desmet Company sold the office equipment on December 31,2012 for $6,000,the amount of net income or (net loss)appearing on the December 31,2012 income statement would be

At the end of the current accounting period,Washta Co.recorded depreciation of $25,000 on its equipment.The effect of this entry on the company's balance sheet is to:

Clampett Corporation paid cash to acquire land to be used for oil production.The costs incurred by Clampett were the following: Estimates were made that 12,500,000 gallons of crude oil can be extracted from the site over the life of the asset. Required: Given that Clampett was able to extract a)230,000 gallons in the first year, b)975,000 gallons in the second year,and c)854,000 gallons in the third year, calculate the depletion charge for each year

Filemyr Corporation,a U.S.business,is a direct competitor of the Hyakawa Company,a Japanese firm.The two firms not only compete for customers,but also for investment capital.In 2012,each company spent about $3,000,000 U.S.dollars or the equivalent on research and development.US GAAP requires the entire amount to be expensed,while Japan requires its businesses to capitalize R&D and expense it over its useful life.Assuming the treatment of R&D is the only difference between the two firms,which of the following is correct?

Smith Corporation purchased land and a building for $300,000.The appraised value of the land is $150,000 and the appraised value of the building is $250,000.What amount of the purchase price will be allocated to the land and what amount will be allocated to the building?

What term is used to describe the situation where the value of an intangible asset may be significantly diminished?

The depreciable cost of a long-term asset is the difference between its original cost and its salvage value.

Explain how a business using the straight-line method would compute the amount of annual depreciation after revising the estimate for the useful life of equipment or a building.

State the reason that goodwill is not amortized as some other intangible assets are.