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Exam 8: Reporting and Analyzing Long-Term Assets

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Question 1

Multiple Choice

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Total asset turnover is used to evaluate:

A) The efficient use of assets to generate sales.
B) The necessity for asset replacement.
C) The number of times operating assets were sold during the year.
D) The cash flows used to acquire assets.
E) The relation between asset cost and book value.

F) C) and D)
G) All of the above

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Question 2

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Capital expenditures are expenditures that keep assets in normal, good operating condition.

A) True
B) False

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Question 3

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On April 1, Year 5 a company discarded a machine that had cost $10,000 and had accumulated depreciation of $8,000 as of December 31, Year 4. The asset had a 5-year life and no salvage value. Prepare the journal entries to record the updating of the depreciation expense and discarding of this asset in Year 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.

Once the estimated depreciation expense for an asset is calculated:

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:

The depreciation method that recognizes equal amounts of annual depreciation over the life of an asset is _______________________________.

Owning a patent:

A company exchanged its used machine for a new machine in a transaction that had commercial substance. The old machine cost $68,000, and the new one had a cash price of $95,000. The company had taken $59,000 depreciation on the old machine and was allowed a $2,500 trade-in allowance and the balance of $92,500 was paid in cash. What gain or loss should be recorded on the exchange?

An asset with a cost of $67,000 and accumulated depreciation of $43,000 is sold for $25,000, the company should record:

The useful life of a plant asset is:

A company made the following expenditures in connection with the construction of a new building: Prepare a schedule showing the amounts to be recorded as Land, Buildings, and Machinery.

Plant assets can be disposed of by discarding, selling, or exchanging them.

Duncan reported net sales of $2,523 million and average total assets of $1,476 million. Its total asset turnover equals 1.71. Total Asset Turnover = Net Sales/Average Total Assets Total Asset Turnover = $2,523/$1,476 = 1.71

Phoenix Agency leases office space for $7,000 per month. On January 3, Phoenix incurs $65,000 to improve the leased office space. These improvements are expected to yield benefits for 8 years. Phoenix has 5 years remaining on its lease. Compute the amount of expense that should be recorded the first year related to the improvements.

An asset can be disposed of by all of the following except:

Revenue expenditures are also called balance sheet expenditures.

A company bought new heating system for $42,000 and was given a trade-in of $2,000 on an old heating system, so the company paid $40,000 cash with the trade-in. The old system had an original cost of $37,000 and accumulated depreciation of $34,000. If the transaction has commercial substance, the company should record the new heating system at:

The total cost of an asset less its accumulated depreciation is called:

One characteristic of plant assets is that they are: