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Exam 8: Reporting and Analyzing Long-Term Assets

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Question 101

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Depreciation expense is higher in earlier years and income is lower in the later years when using straight-line versus accelerated methods.

A) True
B) False

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Question 102

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Capital expenditures,also called balance sheet expenditures,are additional costs of plant assets that provide benefits extending beyond the current period.

A) True
B) False

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Question 103

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Greene Company purchased a machine for $75,000 that was expected to last 6 years and to have a salvage value of $6,000.At the beginning of the machine's fourth year the company decided that the estimated useful life should be revised to a total of 10 years instead of 6 years.Also,the salvage value was re-estimated to be $5,500.Straight-line depreciation was used throughout the machine's life.Calculate the depreciation expense for the fourth year of the machine's useful life.

Martin Company purchases a machine at the beginning of the year at a cost of $60,000.The machine is depreciated using the straight-line method.The machine's useful life is estimated to be 4 years with a $5,000 salvage value.The book value of the machine at the end of year 4 is:

The depreciation method that uses a depreciation rate that is a multiple of the straight-line rate and applies it to an asset's beginning-of-period book value is ________.

Duncan reported net sales of $2,523 million and average total assets of $1,476 million.Its total asset turnover equals 1.71.

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:

Fields Company purchased equipment on January 1 for $180,000.This system has a useful life of 8 years and a salvage value of $20,000.The company estimates that the equipment will produce 40,000 units over its 8-year useful life.Actual units produced are: Year 1 - 4,000 units; Year 2 - 6,000 units; Year 3 - 8,000 units; Year 4 - 5,000 units; Year 5 - 4,000 units; Year 6 - 5,000 units; Year 7 - 7,000 units; Year 8 - 3,000 units.What would be the depreciation expense for the final year of its useful life using the units-of-production method?

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) :

A company's old machine that cost $40,000 and had accumulated depreciation of $22,000 was traded in on a new machine having an estimated 20-year life with an invoice price of $45,000.The company also paid $33,000 cash,along with its old machine to acquire the new machine.If this transaction has commercial substance,the new machine should be recorded at:

A company purchased a tract of land for its natural resources at a cost of $1,000,000.It expects to harvest 5,000,000 board feet of timber from this land.The salvage value of the land is expected to be $200,000.The depletion expense per board foot of timber is:

Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000.The machine's useful life is estimated to be 5 years,or 300,000 units of product,with a $15,000 salvage value.During its first year,the machine produces 64,500 units of product.Determine the machines' first year depreciation under the double-declining-balance method.

A company purchased store equipment for $4,300 by trading in old equipment with a cost of $2,000 and that had accumulated depreciation of $1,900 as of the exchange date.The company received a $75 trade-in allowance for the old equipment with the balance of $4,225 paid in cash.Prepare the journal entry to record the exchange,assuming the transaction had commercial substance.

Victory Company purchases office equipment at the beginning of the year at a cost of $15,000.The machine is depreciated using the straight-line method.The machine's useful life is estimated to be 7 years with a $1,000 salvage value.The book value at the end of 7 years is:

________ is an estimate of an asset's value at the end of its benefit period (or useful life).

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:

Martinez owns an asset that cost $87,000 with accumulated depreciation of $40,000.The company sells the equipment for cash of $42,000.At the time of sale,the company should record:

Once the estimated depreciation expense for an asset is calculated:

Which of the following is an example of an extraordinary repair?

A company purchased a mineral deposit for $800,000.It expects this property to produce 120,000 tons of minerals and to have a salvage value of $50,000.In the current year,the company mined and sold 9,000 tons of minerals.Its depletion expense for the current period equals: