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Exam 8: Reporting and Analyzing Long-Term Assets

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Question 81

Multiple Choice

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When originally purchased, a vehicle costing $23,000 had an estimated useful life of 8 and an estimated salvage value of $1,500. After 4 years of straight-line depreciation, the asset's total estimated useful life was revised from 8 years to 6 years and there was no change in the estimated salvage value. The depreciation expense in year 5: equals:

A) $5,375.00.
B) $2,687.50.
C) $5,543.75.
D) $10,750.00.
E) $2,856.25.

F) A) and E)
G) A) and B)

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Question 82

Multiple Choice

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Intangible assets do not include:

A) Patents.
B) Copyrights.
C) Trademarks.
D) Goodwill.
E) Land held as an investment.

F) A) and E)
G) C) and D)

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Question 83

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Plant assets refer to intangible assets that are used in the operations of a business.

The cost of an intangible asset is systematically allocated to depreciation expense over its estimated useful life.

Beckman Enterprises purchased a depreciable asset on October 1, Year 1 at a cost of $100,000. The asset is expected to have a salvage value of $20,000 at the end of its five-year useful life. If the asset is depreciated on the double-declining-balance method, the asset's book value on December 31, Year 2 will be:

A company paid $320,000 for equipment that was expected to last five years and to have a salvage value of $40,000. During the third year of the equipment's life, $39,000 cash was paid for replacement parts that were expected to increase productivity by 10% each year. Prepare the journal entry to record the $39,000 cost incurred in the third year.

The modified accelerated cost recovery system (MACRS) :

Depletion is:

A leasehold refers to the rights the lessor grants to the lessee under the terms of a lease.

Which of the following is an example of a betterment?

A company had average total assets of $887,000. Its gross sales were $1,090,000 and its net sales were $1,000,000. The company's total asset turnover equals:

_________________ refers to a plant asset that is no longer useful in producing goods or services with a competitive advantage because of new inventions and improvements.

The relevant factors in computing depreciation do not include:

A company needed a new building. It found a suitable location with an existing old building on the land. The company reached an agreement to buy the land and the building for $960,000 cash. The old building was demolished to make way for the needed new building. Following is information regarding the demolition of the old building and construction of the new one: Prepare a single journal entry to record the above costs assuming all transactions are paid in cash.

The specific meaning of goodwill in accounting is:

A company purchased and installed equipment on January 1 at a total cost of $72,000. Straight-line depreciation was calculated based on the assumption of a five-year life and no salvage value. The equipment was disposed of on July 1 of the fourth year. The company uses the calendar year. 1. Prepare the general journal entry to update depreciation to July 1 in the fourth year. 2. Prepare the general journal entry to record the disposal if the equipment was sold for $15,000 cash.

On January 1, Year 1, Naples purchased a computer system that cost $1,480,000. The estimated useful life of the computer is 3 years and salvage value is $40,000. Straight-line depreciation is to be used. On January 1, Year 2, Naples determined that the estimated useful life of the computer would be 4 years instead of 3 years. The estimated salvage value will only be $10,000. Prepare the journal entry to record depreciation expense for Year 1. Prepare the journal entry to record depreciation expense for Year 2.

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

Explain how to calculate total asset turnover. Describe what it reveals about a company's financial condition, whether a higher or lower ratio is desirable, and how it is best applied for comparative purposes.

A company purchased a weaving machine for $190,000. The machine has a useful life of 8 years and a salvage value of $10,000. It is estimated that the machine could produce 75,000 bolts of woven fabric over its useful life. In the first year, 15,000 bolts were produced. Using the units-of-production method, what is the amount of accumulated depreciation at the end of the first year?