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Exam 9: Fixed Assets and Intangible Assets

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Question 61

Multiple Choice

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The method of determining depreciation that yields successive reductions in the periodic depreciation charge over the estimated life of the asset is the

A) time-valuation method
B) units-of-production method
C) straight-line method
D) double-declining-balance method

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

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Question 62

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Classify each of the following costs associated with long-lived assets as one of the following: -Walkways to surround new business location

A) Land improvements
B) Buildings
C) Land
D) Machinery and equipment

E) All of the above
F) A) and B)

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Question 63

Multiple Choice

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Equipment with a cost of $160,000, an estimated residual value of $40,000, and an estimated life of 15 years was depreciated by the straight-line method for 4 years. Due to obsolescence, it was determined that the useful life should be shortened by 3 years and the residual value changed to zero. The depreciation expense for the current and future years is

On June 1, Scotter Company purchased equipment at a cost of $120,000 that has a depreciable cost of $90,000 and an estimated useful life of 3 years or 30,000 hours. Using straight-line depreciation, calculate depreciation expense for the first year.

Match each account name to the financial statement section a-i) in which it would appear. -Land Improvements

Equipment with a cost of $220,000 has an estimated residual value of $30,000 and an estimated life of 10 years or 19,000 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 2,100 hours?

A machine costing $185,000 with a 5-year life and $20,000 residual value was purchased January 2. Compute depreciation for each of the five years, using the double-declining-balance method.

As a company records depreciation expense for a period of time, a corresponding cash inflow from investing activities is reported on the statement of cash flows.

Factors contributing to a decline in the usefulness of a fixed asset may be divided into the following two categories

The units-of-output depreciation method provides a good match of expenses against revenue.

Machinery acquired at a cost of $80,000 and on which there is accumulated depreciation of $55,000 including depreciation for the current year to date) is exchanged for similar machinery. Assume that the transaction has commercial substance. For financial reporting purposes, present entries to record the exchange of the machinery under each of the following assumptions: a) Price of new, $120,000; trade-in allowance on old, $4,000; balance paid in cash. b) Price of new, $120,000; trade-in allowance on old, $34,000; balance paid in cash.

The depreciable cost of a building is the same as its acquisition cost.

Match each account name to the financial statement section a-i) in which it would appear. -Accumulated Depreciation-Buildings

The book value of a fixed asset reported on the balance sheet represents its market value on that date.

A machine with a cost of $120,000 has an estimated residual value of $15,000 and an estimated life of 5 years or 15,000 hours. It is to be depreciated by the units-of-output method. What is the amount of depreciation for the second full year, during which the machine was used 5,000 hours?

Equipment was purchased on January 5, year 1, at a cost of $90,000. The equipment had an estimated useful life of 8 years and an estimated residual value of $8,000. After using the equipment for 3 years, the useful life was revised to a total of 10 years and the residual value was reduced to $2,004. Determine the straight-line depreciation expense for the Year 4 and following years.

The cost of new equipment is called a revenue expenditure because it will help generate revenues in the future.

The transfer to expense of the cost of intangible assets attributed to the passage of time or decline in usefulness is called amortization.

Though a piece of equipment is still being used, the equipment should be removed from the accounts if it has been fully depreciated.

The difference between the balance in a fixed asset account and its related accumulated depreciation account is the asset's book value.