Exam 10: Long-Term Assets

Match each of the following terms with the appropriate definitions.

A copyright gives its owner the exclusive right to publish and sell a musical, literary, or artistic work during the life of the creator plus 17 years.

Decision makers and other users of financial statements are especially interested in evaluating a company's ability to use its assets in generating sales.

The three usual means for disposal of an asset are: ________________________________________________________.

A company used straight-line depreciation for an item of equipment that cost $12,000, had a residual value of $2,000, and had a five-year useful life. After depreciating the asset for three complete years, the residual value was reduced to $1,200 and its total useful life was increased from 5 years to 6 years. Determine the amount of depreciation to be charged against the machine during each of the remaining years of its useful life:

Property, plant and equipment are:

A company sold for $40,000 cash a machine that originally cost $90,000. The accumulated depreciation on this machine was $47,000 at the time of the sale. What was the company's gain or loss on this sale?

On January 1, a company purchased a machine for $75,000 that had a 6-year useful life and a residual value of $6,000. After three years of straight-line depreciation, the company paid $7,500 cash at the beginning of the year to improve the efficiency of the machine. The effect of the expenditure was to increase the productivity of the machine without increasing its remaining useful life or changing its residual value. Straight-line depreciation is used throughout the machine's life. 1. Prepare the journal entry to record the $7,500 expenditure. 2. Prepare the journal entry to record depreciation expense for the fourth year.

A company sold a machine that originally cost $100,000 for $60,000 cash. The accumulated depreciation on the machine was $40,000. The company should recognize a:

A company purchased a computer system on January 1, Year 1, for $1,600,000. Prepare the journal entries to record depreciation for the first 6 months of Year 3 and the sale of the computer assuming it is sold on July 1, Year 3, for $1,000,000 cash. The straight-line method of depreciation was used based on an expected life of six years and a residual value of $130,000.

Wilson Engineering purchased a depreciable asset costing $45,000 on January 1, Year 1. The asset is estimated to have a residual value of $5,000 and an estimated useful life of 8 years. Straight-line depreciation is used. If the asset is sold on July 1, Year 5 for $20,000, the journal entry to record the sale will include:

Depreciation:

An asset's carrying amount is $18,000 on June 30, Year 6. The asset is being depreciated at an annual rate of $3,000 on the straight-line method. Assuming the asset is sold on December 31, Year 7 for $15,000, the company should record:

If a machine is damaged during unpacking, the repairs are added to its cost.

_______________________ depreciation recognizes equal amounts of annual depreciation over the life of an asset.

Explain the impact, if any, on depreciation when estimates that determine depreciation change.

Define property, plant and equipment and identify the four primary issues in accounting for them.

The cost of an intangible asset is systematically allocated to depreciation expense over its estimated useful life.

Revising estimates of the useful life or residual value of an item of property, plant and equipment is referred to as a ___________________________________________.

Mahoney Company had the following transactions involving property, plant and equipment during Year 1 and Year 2. Unless otherwise indicated, all transactions were for cash. Prepare the general journal entries to record these transactions.