Exam 11: Investments in Noncurrent Operating Assets-Utilization and Retirement

A company owns a piece of land that originally cost $10,000 and has a fair market value of $8,000.It is exchanged along with $5,000 cash for another piece of land having a fair value of $13,000.The exchange had commercial substance.The proper journal entry to record this transaction is

In January 2014,Shone Company exchanged an old machine,with a book value of $156,000 and a fair value of $140,000,and paid $40,000 cash for a similar used machine having a list price of $200,000.The exchange had commercial substance.At what amount should the machine acquired in the exchange be recorded on Shone's books?

A company using the group depreciation method for its delivery trucks retired one of the trucks after the average service life of the group was reached.Cash proceeds were received from a salvage company.The net carrying amount of these group asset accounts would be decreased by the

The most recent annual report of the Albondiga Company includes the following information: (in millions of dollars) The group method of depreciation treats all assets within a group as having a uniform useful life and applies a depreciation rate based on the total cost of the group.No gain or loss is recognized on disposal under this method.Accumulated depreciation is reduced by the difference between the cost of the assets disposed of and cash proceeds. Required:

Algon Company owns a machine that cost $560,000,has a book value of $240,000,and an estimated fair value of $480,000.Nogal Company has a machine that cost $720,000,has accumulated depreciation of $400,000,and an estimated fair value of $640,000.Algon pays Nogal cash of $160,000.Assume the trade has commercial substance.

Depreciation is the systematic allocation of historical depreciable cost to periods in which an asset is used.Depreciation is not a cash outflow but does reduce reported income and thus retained earnings by the depreciable cost of the asset less the tax savings associated with depreciation. Required:

Hyde Company traded in an old machine with a book value of $15,000 on a new machine.The exchange did not have commercial substance.The new machine,which had a cash price of $75,000,was purchased for $64,000 cash plus the old machine.Hyde should record the cost of the new machine as

Information needed to compute a depletion charge per unit includes the

Which of the following utilizes the straight-line depreciation method? Composite Group Depreciation Depreciation

Underwood Company purchased a machine on January 2,2013,for $1,000,000.The machine has an estimated useful life of five years and a salvage value of $100,000.Depreciation was computed by the 150% declining-balance method.The accumulated depreciation balance at December 31,2014,should be

Irvington Manufacturing Inc.purchased a new machine on January 2,2014,that was built to perform one function on its assembly line.Data pertaining to this machine are: Acquisition cost $330,000 Residual value $30,000 Estimated service life: Years 5 Service hours 250,000 Production output 300,000 Using each of the following methods,compute the annual depreciation rate and charge for the years ended December 31,2014,and 2015:

On June 30,2014,a fire in Walnut Company's plant caused the total loss of a production machine.The machine was being depreciated at $20,000 annually and had a carrying amount of $160,000 at December 31,2013.On the date of the fire,the fair value of the machine was $220,000,and Walnut received insurance proceeds of $200,000 in October 2014.In its income statement for the year ended December 31,2014,what amount should Walnut recognize as a gain or loss on disposition?

Which of the following depreciation methods applies a uniform depreciation rate each period to an asset's book value?

Pepitone Inc.exchanged a machine costing $400,000 with accumulated depreciation of $280,000 for a machine from the Berra Company.Berra paid $20,800 cash in addition to its machine (which cost $200,000 with accumulated depreciation of $68,000)for the Pepitone machine.The Berra machine has a fair value of $160,000. Provide the necessary entries to record the transactions on both companies' books assuming the machine lacks commercial substance.

During 2009,Cabot Machine Company spent $352,000 on research and development costs for an invention.This invention was patented on January 2,2010,at a nominal cost that was expensed in 2010.The patent has a legal life of 17 years and an estimated useful life of 8 years.In January 2014,Cabot paid $32,000 for legal fees in a successful defense of the patent.Amortization for 2014 should be

A truck that cost $12,000 was originally being depreciated over four years using the straight-line method with no salvage value.If after one year,it was decided that the truck would last an additional four years (or a total of five years),the second year's depreciation would be

In recording the trade of one asset for another,which of the following accounts is usually debited?

The impairment test for an intangible asset with a definite life compares the

Cavallo Company acquired a tract of land containing an extractable natural resource.Cavallo is required by the purchase contract to restore the land to a condition suitable for recreational use after it has extracted the natural resource.Geological surveys estimate that the recoverable reserves will be 2,500,000 tons and that the extraction will be completed in five years.Relevant cost information follows: What should be the depletion charge per ton of extracted material?