FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 9: Reporting and Analyzing Long-Lived Assets

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 131

Multiple Choice

Review LaterAdd Note

Review Later

Intangible assets are the rights and privileges that result from ownership of long-lived assets that

A) must be generated internally.
B) are depreciated over their useful life.
C) have been exchanged at a gain.
D) do not have physical substance.

E) None of the above
F) All of the above

Correct Answer

verified

Show Answer

Question 132

Essay

Review LaterAdd Note

Review Later

How is a gain or a loss on the sale of a plant asset computed?

Correct Answer

verified

In a sale of plant assets, the book valu...

View Answer

Show Answer

Question 133

Essay

Review LaterAdd Note

Nelson Company, organized in 2014, has these transactions related to intangible assets in that year: Instructions (a) Prepare the necessary entries to record these intangibles. All costs incurred were for cash. (b) Make the entries as of December 31, 2014, recording any necessary amortization. (c) Indicate what the balance should be on December 31, 2014.

Runge Company purchased machinery on January 1 at a list price of $250,000, with credit terms 2/10, n/30. Payment was made within the discount period. Runge paid $12,500 sales tax on the machinery, and paid installation charges of $4,400. Prior to installation, Runge paid $10,000 to pour a concrete slab on which to place the machinery. What is the total cost of the new machinery?

Pearson Company bought a machine on January 1, 2014. The machine cost $144,000 and had an expected salvage value of $24,000. The life of the machine was estimated to be 5 years. The depreciation expense using the straight-line method of depreciation is

Recording depreciation each period is an application of the matching principle.

Stan's Lumber Mill sold two pieces of equipment in 2014. The following information pertains to the two pieces of equipment: Instructions (a) Compute the depreciation on each piece of equipment to the date of disposal. (b) Prepare the journal entries in 2014 to record 2014 depreciation and the sale of each piece of equipment.

The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method that

Equipment with a cost of $225,000 has an estimated salvage value of $15,000 and an estimated life of 4 years or 10,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 2,700 hours?

When a change in estimate is made, there is no correction of previously recorded depreciation expense.

(Communication) The Old Fix-It is a company specializing in the restoration of old homes. To showcase its work, the company purchased an old Victorian home in downtown Pittsburg, Kansas on January 2, 2010. The original home was purchased for $125,000. A new heating and air-conditioning system was added for $30,000. The house was completely rewired and re-plumbed at a cost of $50,000. Custom cabinets were added, and the floors and trim were refurbished to their original condition, at a cost of $75,000. The project was such a success, that Old Fix-It decided on January 2, 2014, to purchase another very large home, this time in nearby Joplin, Missouri. On January 3, 2014, a realtor offered to purchase the home in Pittsburg for $175,000. He plans to lease it as luxury short-term apartments for visiting dignitaries. Mark Gibson, the president of Old Fix-It, decided that the $50,000 gain over purchase price was appropriate, and so he agreed to sell the showcase house. Only afterward did he learn that Old Fix-It had a loss of almost $30,000 on the sale. Mark does not believe that a loss is possible. "We sold that house for more than we paid for it," he said. "I know we put some money in it, but we had depreciated it for four years. How in the world can we have a loss?" Due to the commercial aspects of the property and its expected traffic flow, the life of the showcase house was established as 15 years. Old Fix-It utilized straight-line depreciation with no salvage or residual value. Old Fix-It took full years' of depreciation in 2010 through 2013 and none in 2014 due to the sale date of January 3, 2014. Required: Write a short memo to Mr. Gibson explaining how it would be possible to have a loss. Address cost and depreciation as general numbers rather than specific values.

As a recent graduate of State University you're aware that IFRS requires component depreciation for plant assets. A friend has asked you to succinctly explain what component depreciation means. Which of the following correctly describes component depreciation?

A characteristic of capital expenditures is that the expenditures occur frequently during the period of ownership.

On January 1, a machine with a useful life of four years and a residual value of $12,000 was purchased for $60,000. What is the depreciation expense for year 2 under straight-line depreciation?

How is the cost for a plant asset measured in a cash transaction? In a noncash transaction?

Danford Trucking purchased a tractor trailer for $126,000. Danford uses the units-of-activity method for depreciating its trucks and expects to drive the truck 1,000,000 miles over its 12-year useful life. Salvage value is estimated to be $18,000. If the truck is driven 80,000 miles in its first year, how much depreciation expense should Danford record?

Which of the following is not an intangible asset that is reported on the balance sheet?

A plant asset acquired on October 1, 2014, at a cost of $800,000 has an estimated useful life of 10 years. The salvage value is estimated to be $50,000 at the end of the asset's useful life. Instructions Determine the depreciation expense for the first two years using the: (a) straight-line method. (b) double-declining-balance method.

Salem Company hired Kirk Construction to construct an office building for ₤8,000,000 on land costing ₤2,000,000, which Salem Company owned. The building was complete and ready to be used on January 1, 2014 and it has a useful life of 40 years. The price of the building included land improvements costing ₤600,000 and personal property costing ₤750,000. The useful lives of the land improvements and the personal property are 10 years and 5 years, respectively. Salem Company uses component depreciation, and the company uses straight-line depreciation for other similar assets. What total amount of depreciation expense would Salem Company report on its income statement for the year ended December 31, 2014?

In 2014, Blanchard Corporation has plant equipment that originally cost $90,000 and has accumulated depreciation of $36,000. A new processing technique has rendered the equipment obsolete, so it is retired. Which of the following entries should Blanchard use to record the retirement of the equipment?