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Exam 8: Long-Term Assets

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Question 91

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A company purchased equipment valued at $825,000 on January 1.The equipment has an estimated useful life of seven years or 6 million units.The equipment is estimated to have a salvage value of $35,000.Assuming the double-declining-balance method of depreciation,what is depreciation for the second year?

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100%/7 = 14.28 * 2 = 28.57% ...

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Question 92

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A new machine is expected to produce 600,000 units of product during its eight-year useful life.The machine cost $1,800,000 cash and it is estimated to have a $60,000 salvage value.If depreciation on the machine is calculated by the double-declining-balance method,what is the depreciation for the first year?

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$1,800,000...

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Question 93

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Treating capital expenditures of a small dollar amount as revenue expenditures is likely to mislead the users of financial statements.

A company had average total assets of $897,000.Its gross sales were $1,090,000 and its net sales were $1,000,000.The company's total asset turnover is equal to:

A company paid $770,000 plus $5,000 in closing costs for property that included land appraised at $384,000; land improvements appraised at $128,000; and a building appraised at $288,000.The plan is to use the building as a manufacturing plant.Determine the amounts that should be recorded as: a.Land............................$___________________ b.Land Improvements....$___________________ c.Building......................$___________________

The formula for calculating total asset turnover is _______________________________________.

Once the estimated depreciation expense for an asset is calculated:

A company discarded a display case that it had originally purchased for $8,000.The case had $7,200 worth of accumulated depreciation.The company should recognize a(n) :

A company had net sales of $230,000 for 2013 and $288,000 for 2014.The company's average total assets for 2013 were $150,000 and $180,000 for 2014.Calculate the total asset turnover for each year and comment on the company's efficiency in the use of its assets.

Endor Fishing Company exchanged an old boat for a new one.The old boat had a cost of $260,000 and accumulated depreciation of $200,000.The new boat had an invoice price of $400,000.Endor received a trade in allowance of $100,000 on the old boat,which meant they paid $300,000 in addition to the old boat to acquire the new boat.What amount of gain or loss should be recorded on this exchange? (The exchange lacks commercial substance.)

A company purchased equipment valued at $200,000 on January 1.The equipment has an estimated useful life of six years or 5 million units.The equipment is estimated to have a salvage value of $13,400.Assuming the straight-line method of depreciation,what is the depreciation for the second year?

Match the following definitions with the appropriate terms

A company purchased a special purpose machine on August 1 of the past year and it was installed and ready to run on January 1 of this year.The following costs were incurred in the purchase and installation of the machine. Determine the total cost of the machine. $\begin{array}{|l|r|}\hline \text { Invoice price } & \$ 1,200,000 \\\hline \text { Freight costs } & 6,000 \\\hline \text { Installation costs } & 64,000 \\\hline \text { Electrical and power connections } & 32,000 \\\hline \text { Repairs to correct damage incurred during uncrating } & 12,000 \\\hline \text { Costs to adjust machine to appropriate specifications } & 56,000 \\\hline \text { Spare parts for future use } & 108,000 \\\hline \text { Sales tax } & 70,500 \\\hline \text { Fines incurred during transport of machine } & 400 \\\hline \text { Cost of special foundation required for machine installation } & 28,500\\\hline\end{array}$

______________ is the process of systematically allocating the cost of an intangible asset to expense over its estimated useful life.

Gain or loss on the disposal of an asset is determined by comparing "value given" (book value)to "value received."

Blanket Corporation sold equipment for cash of $40,500.Accumulated depreciation on the sale date amounted to $34,000 and a loss of $1,800 was recognized on the sale. What was the original cost of the asset?

Extraordinary repairs:

Revenue expenditures:

The formula for computing annual straight-line depreciation is:

_______________________ are expenditures that extend an asset's useful life beyond its original estimate.