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Exam 8: Accounting for Long-Term Assets

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Question 61

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On April 1 of the current year,a company traded an old machine that originally cost $32,000 and that had accumulated depreciation of $24,000 for a similar new machine that had a cash price of $40,000. 1.Prepare the entry to record the exchange under the assumption that a $5,000 trade-in allowance was received and the balance of $35,000 was paid in cash.Assume the exchange transaction had commercial substance. 2.Prepare the entry to record the exchange under the assumption that instead of a $5,000 trade-in allowance,a $12,500 trade-in allowance was received and the balance of $27,500 was paid in cash.Assume the exchange transaction has commercial substance.

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Question 62

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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:

A) A gain on sale of $2,000.
B) A loss on sale of $2,000.
C) A loss on sale of $5,000.
D) A gain on sale of $5,000.
E) A loss on sale of $45,000.

F) None of the above
G) All of the above

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Question 63

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Companies that have a relatively large amount invested in assets to generate a given level of sales are considered capital-intensive.

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

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.

On January 2,2010,a company purchased a delivery truck for $45,000 cash.The truck had an estimated useful life of seven years and an estimated salvage value of $3,000.The straight-line method of depreciation was used.Prepare the journal entries to record depreciation expense and the disposition of the truck on September 1,2014,under each of the following assumptions: a.The truck and $45,000 cash were given in exchange for a new delivery truck that had a cash price of $60,000.This transaction has commercial substance. b.The truck and $40,000 cash were exchanged for a new delivery truck that had a cash price of $60,000.This transaction has commercial substance.

An asset's book value is $36,000 on January 1,Year 6.The asset is being depreciated $500 per month using the straight-line method.Assuming the asset is sold on July 1,Year 7 for $25,000,the company should record:

A gain or loss is recorded for exchanges of plant assets with commercial substance.

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.

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

Match each of the appropriate definitions with correct term.

Revising an estimate of the useful life or salvage value of a plant asset is referred to as a change in accounting estimate and is reflected in the current,and future financial statements.

Since goodwill is an intangible asset,it is amortized each year using the straight-line method.

Owning a patent:

Extraordinary repairs:

Cliff Company traded in an old truck for a new one.The old truck had a cost of $75,000 and accumulated depreciation of $60,000.The new truck had an invoice price of $125,000.Huffington was given a $12,000 trade-in allowance on the old truck,which meant they paid $113,000 in addition to the old truck to acquire the new truck.If this transaction has commercial substance,what is the recorded value of the new truck?

Describe the accounting for natural resources,including their acquisition,cost allocation,and account titles.

Describe the accounting for intangible assets,including their acquisition,cost allocation,and accounts involved.

On January 1,2016,a company disposed of equipment for $16,200 cash that had cost $35,000,a salvage value of $5,000,and a useful life 10 years.The double-declining-balance depreciation method was used.On December 31,2015,accumulated depreciation was $20,664.Prepare a journal entry to record the disposal of the equipment.

When the usefulness of plant assets used to extract natural resources is directly related to the depletion of a natural resource,their costs are depreciated using the units-of-production method of depreciation.