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Exam 8: Reporting and Analyzing Long-Term Assets

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Question 121

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Land improvements are:

A) Assets that increase the usefulness of land, and like land, are not depreciated.
B) Assets that increase the usefulness of land, but that have a limited useful life and are subject to depreciation.
C) Included in the cost of the land account.
D) Expensed in the period incurred.
E) Also called basket purchases.

F) A) and B)
G) C) and D)

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Question 122

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Merchant Company purchased property for a building site. The costs associated with the property were: What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?

A) $187,700 to Land; $19,000 to Building.
B) $200,700 to Land; $6,000 to Building.
C) $200,000 to Land; $6,700 to Building.
D) $185,000 to Land; $21,700 to Building.
E) $206,700 to Land; $0 to Building.

F) B) and C)
G) B) and E)

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Question 123

Multiple Choice

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Plant assets are defined as:

A company used straight-line depreciation for equipment that cost $12,000, had a salvage value of $2,000 and a five-year useful life. After depreciating the asset for three complete years, the salvage value was reduced to $1,200 but its total useful life remained the same. Determine the amount of depreciation to be charged against the equipment during each of the remaining years of its useful life:

Riverboat Adventures pays $310,000 plus $15,000 in closing costs to buy out a competitor. The real estate consists of land appraised at $35,000, a building appraised at $105,000, and paddleboats appraised at $210,000. Compute the cost that should be allocated to the land.

Extraordinary repairs:

Additional costs of plant assets that do not materially increase the asset's life or productive capabilities are recorded as ______________________________.

A company discarded a computer system originally purchased for $18,000. The accumulated depreciation was $17,200. The company should recognize a(an) :

A company purchased and installed machinery on January 1 at a total cost of $93,000. Straight-line depreciation was calculated based on the assumption of a five-year life and no salvage value. The machinery was disposed of on July 1 of year four. The company uses the calendar year. 1. Prepare the general journal entry to update depreciation to July 1 in year four. 2. Prepare the general journal entry to record the sale of the machine for $27,000 cash.

Revenue expenditures:

A building was purchased for $370,000 and depreciated for ten years on a straight-line basis under the assumption it would have a twenty-year life and a $10,000 salvage value. At the beginning of the building's eleventh year it was recognized the building had eight years of remaining life instead of ten and that at the end of the remaining eight years its salvage value would be $16,000. What amount of depreciation should be recorded in each of the building's remaining eight years?

Explain in detail how to compute each of the following depreciation methods: straight-line, units-of-production, and double-declining-balance.

A company exchanged an old automobile for a newer model. The old automobile account had a cost of $36,000 and accumulated depreciation of $25,000 as of the exchange date. The new automobile had a cash price of $34,000, but the company was given a $15,000 trade-in allowance and the balance of $19,000 was paid in cash. Prepare the journal entry to record the exchange, if the transaction lacks commercial substance.

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

Depreciation does not measure the decline in market value of an asset each period.

The depreciation method that produces larger depreciation expense during the early years of an asset's life and smaller expense in the later years is a(an) :

The calculation of total asset turnover is:

Ngu owns equipment that cost $93,500 with accumulated depreciation of $64,000. Ngu asks $35,000 for the equipment but sells the equipment for $33,000. Compute the amount of gain or loss on the sale.

Schwartz Co. paid $780,000 cash to buy the plant assets of Kimberly Co. that went out of business. An independent appraiser assigned the following values to the assets acquired: Prepare Schwartz' journal entry to record the acquisition of these assets.

Natural resources may be reported under either plant assets or their own separate category on the balance sheet.