Question 1

Granite Company purchased a machine costing $120,000, terms 1/10, n/30. The machine was shipped FOB shipping point and freight charges were $2,000. The machine requires special mounting and wiring connections costing $10,000. When installing the machine, $1,300 in damages occurred. Compute the cost recorded for this machine assuming Granite paid within the discount period.

Accepted Answer

A)  $129,800. 
B)  $132,100. 
C)  $130,800. 
D)  $120,100. 
E)  $118,800.

Question 2

Salvage value is:

Accepted Answer

A)  A factor relevant to amortizing an intangible asset with an indefinite life. 
B)  A factor relevant to determining depreciation under MACRS. 
C)  An estimate of the asset's value at the end of its benefit period. 
D)  A factor relevant to determining depreciation that cannot be revised during an asset's useful life. 
E)  Not a factor relevant to determining depletion.

Question 3

On January 1, Year 1, Naples purchased a computer system that cost $1,480,000. The estimated useful life of the computer is 3 years and salvage value is $40,000. Straight-line depreciation is to be used. On January 1, Year 2, Naples determined that the estimated useful life of the computer would be 4 years instead of 3 years. The estimated salvage value will only be $10,000.
Prepare the journal entry to record depreciation expense for Year 1. Prepare the journal entry to record depreciation expense for Year 2.

Accepted Answer

The answer of On January 1, Year 1, Naples purchased...

Question 4

Beckman Enterprises purchased a depreciable asset on October 1, Year 1 at a cost of $100,000. The asset is expected to have a salvage value of $20,000 at the end of its five-year useful life. If the asset is depreciated on the double-declining-balance method, the asset's book value on December 31, Year 2 will be:

Accepted Answer

A)  $54,000 
B)  $90,000 
C)  $16,000 
D)  $36,000 
E)  $42,000

Question 5

Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $87,000. The machine's useful life is estimated to be 5 years, or 400,000 units of product, with a $7,000 salvage value. During its second year, the machine produces 84,500 units of product
- Determine the machines' second year depreciation under the straight-line method.

Accepted Answer

A)  $20,880. 
B)  $17,400. 
C)  $16,900. 
D)  $16,000. 
E)  $18,379.

Question 6

__________are capital expenditures that make a plant asset more productive but do not always increase an asset's life; they often involve adding a component to an asset or replacing one of its old components with a better one.

Accepted Answer

The answer of  __________are capital expenditures that make a...

Question 7

Total asset turnover is calculated by dividing average total assets by net sales.

Accepted Answer

A) True 
 B)False

Question 8

The useful life of a plant asset is:

Accepted Answer

A)  Never related to its physical life. 
B)  Determined by law. 
C)  Determined by the FASB. 
D)  Its productive life, but not to exceed one year. 
E)  The length of time it is productively used in a company's operations.

Question 9

The term inadequacy, as it relates to the useful life of an asset, refers to:

Accepted Answer

A)  An asset that is no longer useful in producing goods and services. 
B)  The condition where the asset's salvage value is less than its cost. 
C)  The insufficient capacity of a company's plant assets to meet the company's growing production demands. 
D)  An asset that is worn out. 
E)  The condition where the salvage value is too small to replace the asset.

Question 10

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the double-declining-balance method. The machine's useful life is estimated to be 5 years with a $4,000 salvage value.
- Depreciation expense in year 2 is:

Accepted Answer

A)  $9,600. 
B)  $8,000. 
C)  $14,400. 
D)  $4,800. 
E)  $5,760.

Question 11

Additions to land that increase the usefulness of the land such as parking lots, fences, and lighting are not depreciated.

Accepted Answer

A) True 
 B)False

Question 12

A company purchased a cooling system on January 2 for $225,000. The system had an estimated useful life of 15 years. After using the system for 13 full years, the company completed a renovation of the system at a cost of $33,000 and now expects the system to be more efficient and last 8 years beyond the original estimate. The company uses the straight-line method of depreciation.
(a) Prepare the journal entry at January 3, to record the renovation of the cooling system.
(b) Prepare the journal entry at December 31, to record the revised depreciation for the thirteenth year.

Accepted Answer

The answer of A company purchased a cooling system on...

Question 13

Amortization is:

Accepted Answer

A)  The systematic allocation of the cost of an intangible asset to expense over its estimated useful life. 
B)  The process of allocating to expense the cost of a plant asset to the accounting periods benefiting from its use. 
C)  Also called depletion. 
D)  An accelerated form of expensing an asset's cost. 
E)  The process of allocating the cost of natural resources to periods when they are consumed.

Question 14

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 5 years with a $4,000 salvage value. 
-Depreciation expense in year 2 is:

Accepted Answer

A)  $4,800. 
B)  $20,000. 
C)  $9,600. 
D)  $0. 
E)  $4,000.

Question 15

Holding a copyright:

Accepted Answer

A)  Gives its owner an exclusive right to manufacture and sell a device or to use a process for 50 years. 
B)  Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 20 years. 
C)  Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 70 years. 
D)  Indicates that the value of a company exceeds the fair market value of a company's net assets if purchased separately. 
E)  Gives its owner an exclusive right to manufacture and sell a patented item or to use a process for 20 years.

Question 16

If land is purchased as a building site, the cost of removing existing structures is not charged to the Land account.

Accepted Answer

A) True 
 B)False

Question 17

A  __________results from revising estimates of the useful life or salvage value of a plant asset.

Accepted Answer

The answer of A  __________results from revising estimates of...

Question 18

A company's property records revealed the following information about one of its plant assets:
 $$\begin{array} { | c | l | c | l | l | } 
\hline \text { Cost } & \begin{array} { l } 
\text { Salvage } \
\text { Value }
\end{array} & \begin{array} { l } 
\text { Purchase } \
\text { Date }
\end{array} & \begin{array} { l } 
\text { Estimated } \
\text { Life }
\end{array} & \text { Depreciation Method } \
\hline \$ 450,000 & \$ 30,000 & 10 / 01 & 7 \text { years } & \text { Straight-line } \
\hline
\end{array}$$ Calculate the depreciation expense for the asset in Year 1 and Year 2 for the year ended December 31.
Year 1______________________ Year 2 _______________________

Accepted Answer

The answer of A company's property records revealed the following...

Question 19

A company had a tractor destroyed by fire. The tractor originally cost $85,000 with accumulated depreciation of $60,000. The proceeds from the insurance company were $20,000. The company should recognize:

Accepted Answer

A)  A gain of $20,000. 
B)  A loss of $5,000. 
C)  A gain of $65,000. 
D)  A gain of $5,000. 
E)  A loss of $20,000.

Question 20

A company purchased a machine on January 1 of the current year for $750,000. Calculate the annual depreciation expense for each year of the machine's life (estimated at 5 years or 20,000 hours, with a salvage value of $75,000) using each of the below-mentioned methods. During the machine's 5-year life its hourly usage was: 3,000; 4,000; 5,000; 5,000; and 3,000 hours.
 $$\begin{array} { l | l | l | l } 
& \text { Straight-line } & \text { Uhits-of-production } & \text { Double-declining balance } \
\hline \text { Year I } & & & \
\hline \text { Year 2 } & & & \
\hline \text { Yaar 3 } & & & \
\hline \text { Year 4 } & & & \
\hline \text { Year 5 } & & & \
\hline \text { Totals } & & &
\end{array}$$

Accepted Answer

The answer of A company purchased a machine on January...

Exam 10: Plant Assets Natural Resoures and Intangibles

Salvage value is:

__________are capital expenditures that make a plant asset more productive but do not always increase an asset's life; they often involve adding a component to an asset or replacing one of its old components with a better one.

Total asset turnover is calculated by dividing average total assets by net sales.

The useful life of a plant asset is:

The term inadequacy, as it relates to the useful life of an asset, refers to:

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the double-declining-balance method. The machine's useful life is estimated to be 5 years with a $4,000 salvage value. - Depreciation expense in year 2 is:

Additions to land that increase the usefulness of the land such as parking lots, fences, and lighting are not depreciated.

Amortization is:

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 5 years with a $4,000 salvage value. -Depreciation expense in year 2 is:

Holding a copyright:

If land is purchased as a building site, the cost of removing existing structures is not charged to the Land account.

A __________results from revising estimates of the useful life or salvage value of a plant asset.

A company had a tractor destroyed by fire. The tractor originally cost $85,000 with accumulated depreciation of $60,000. The proceeds from the insurance company were $20,000. The company should recognize: