Exam 10: Long -Term Assets

All of the following are used in estimating a depreciable asset's useful life except

Research and development costs normally are capitalized and amortized over the estimated sales life of the product developed.

A truck is purchased for $70,000.It has a five-year life and a $10,000 residual value.Under the straight-line method,what is the asset's carrying value after three years?

Extraordinary repairs usually are recorded by making a debit to

On January 1,a machine with a useful life of five years and a residual value of $4,500 is purchased for $22,500.What is the depreciation expense in year 3 under straight-line depreciation?

In accounting,depreciation means the decline in value of an asset.

One argument in favor of accelerated depreciation is that repair expense is likely to be greater in later years.

Which of the following is not classified properly as property,plant,and equipment?

Small expenditures for what ordinarily are considered capital expenditures frequently are treated as revenue expenditures.

Estimated useful life and legal life are synonymous terms when dealing with intangible assets.

Which of the following would be considered a capital expenditure?

The cost of equipment would include the cost of test runs to see that the equipment is operating properly.

Under the successful efforts method,the costs of both successful and unsuccessful exploration for oil and gas are recorded as assets.

Russell Company's air-conditioning system has just completed the eighth year of an estimated ten-year life.The system cost $60,000 and now has accumulated depreciation of $48,000.At the beginning of the ninth year,the company expects to spend $16,000 on a complete renovation of the system and expects the total life of the system to be fifteen years.Neither the capacity of the system nor the residual value was increased.The company uses the straight-line method to determine depreciation.Determine the following: (a)the account debited for the cost of renovation,(b)the carrying value of the system after renovation,and (c)the depreciation expense for the ninth year.

The entry to record the sale of equipment costing $40,000,with accumulated depreciation of $34,000 and sale price of $7,700,will include

Depreciation should not be recorded for an asset that is increasing in value.

When an intangible asset becomes worthless,

Grannis Corporation purchased land adjacent to its plant to improve access for trucks making deliveries.Expenditures incurred by the company were as follows: purchase price,$40,000; broker's fees,$7,000; title search and other fees,$6,000; demolition of an old building on the property,$3,700; grading,$1,200; digging foundation for the road,$3,000; laying and paving driveway,$25,000; lighting,$7,500; signs,$1,500.List the items and the amounts that should be included in the cost of the land and recorded in the Land account.

A $750 gain on the sale of an asset means that $750 in cash was received.

In calculating the depletion of a natural resource,its useful life in years is irrelevant.