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Exam 8: Accounting for Long-Term Assets

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Question 61

Multiple Choice

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Depletion:

A) Is the process of allocating the cost of natural resources to periods in which they are consumed.
B) Is also called depreciation.
C) Is also called amortization.
D) Is an unrealized expense reported in equity.
E) Is the process of allocating the cost of intangibles to periods in which they are used.

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

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Question 62

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The formula for computing annual straight-line depreciation is:

A) Depreciable cost divided by useful life in units.
B) Cost plus salvage value divided by the useful life in years
C) Cost less salvage value divided by the useful life in years.
D) Cost divided by useful life in years.
E) Cost divided by useful life in units.

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

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Question 63

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______________ is the process of systematically allocating the cost of an intangible asset to expense over its estimated useful life.

Decision makers and other users of financial statements are especially interested in evaluating a company's ability to use its assets in generating sales.

A company purchased a music distributor's collection of lyrics and songs for $1,425,000. The copyrights are expected to last another 30 years. Prepare the journal entry to record the amortization expense for the first year.

A company purchased equipment valued at $200,000 on January 1. The equipment has an estimated useful life of six years or 5 million units. The equipment is estimated to have a salvage value of $13,400. Assuming the double declining balance method of depreciation, what is the depreciation for the second year?

Depreciation is the process of allocating the cost of a plant asset to an expense account in the accounting periods benefiting from its use.

A company purchased equipment valued at $200,000 on January 1. The equipment has an estimated useful life of six years or 5 million units. The equipment is estimated to have a salvage value of $13,400. Assuming the units of production method of depreciation, what is the annual depreciation for the second year if 1.5 million units were produced?

_______________________ depreciation recognizes equal amounts of annual depreciation over the life of an asset.

A company exchanged an old truck for a newer model. The old truck account had a cost of $76,000 and accumulated depreciation of $65,000 as of the exchange date. The new truck had a cash price of $84,000, but the company was given a $15,000 trade-in allowance and the balance of $69,000 was paid in cash. Prepare the journal entry to record the exchange.

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

A company had a bulldozer destroyed by fire. The bulldozer originally cost $125,000. The accumulated depreciation on it was $60,000. The proceeds from the insurance company were $90,000. The company should recognize:

Plant assets are:

Total asset turnover is used to evaluate:

Define plant assets and identify the four primary issues in accounting for them.

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 past, current, and future financial statements.

January 2010, Giant Green Company pays $3,000,000 for a tract of land with two buildings on it. It plans to demolish Building 1 and build a new store in its place. Building 2 will be a company office; it is appraised at $742,000, with a useful life of 25 years and a $75,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $400,500 that are expected to last another 18 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $2,020,600. Giant Green also incurs the following additional costs: What is the amount that should be recorded for land?

Both the straight-line depreciation method and the double-declining-balance depreciation method:

Accumulated depreciation represents funds set aside to buy new assets when the assets currently owned are replaced.

Gain or loss on the disposal of an asset is determined by comparing "value given" (book value) to "value received."