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Exam 9: Long-Term Assets: Fixed and Intangible

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Question 21

Multiple Choice

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When a company sells machinery at a price equal to its book value,this transaction would be recorded with an entry that would include the following:

A) debit Cash and Accumulated Depreciation; credit Machinery
B) debit Machinery; credit Cash and Accumulated Depreciation
C) debit Cash and Machinery; credit Accumulated Depreciation
D) debit Cash and Depreciation Expense; credit Accumulated Depreciation

E) B) and C)
F) C) and D)

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Question 22

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

A) True
B) False

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Question 23

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A machine costing $57,000 with a 6-year life and $54,000 depreciable cost was purchased January 1.Compute the yearly depreciation expense using straight-line depreciation.

The higher the fixed asset turnover,​ the

For income tax purposes,most companies use an accelerated deprecation method called double declining balance.

Golden Sales has bought $135,000 in fixed assets on January 1st associated with sales equipment.The residual value of these assets is estimated at $10,000 at the end of their 4-year service life.Golden Sales managers want to evaluate the options of depreciation. ​ (a)Compute the annual straight-line depreciation and provide the sample depreciation journal entry to be posted at the end of each of the years. (b)Write the journal entries for each year of the service life for these assets using the double-declining balance method.

During construction of a building,the cost of interest on a construction loan should be charged to an expense account.

The following information was taken from a recent annual report of Harrison Company (in millions): ​ Required:

When a plant asset is traded for another similar asset,losses on the asset traded are not recognized.

All property,plant,and equipment assets are depreciated over time.

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

On April 15,Compton Co.paid $2,800 to upgrade a delivery truck and $125 for an oil change.Journalize the entries for the upgrade to delivery truck and oil change expenditures.

Comment on the validity of the following statements."As an asset loses its ability to provide services,cash needs to be set aside to replace it.Depreciation accomplishes this goal."

A machine with a cost of $75,000 has an estimated residual value of $5,000 and an estimated life of 4 years or 18,000 hours.What is the amount of depreciation for the second full year,using the double-declining-balance method?

On July 1,Hartford Construction purchases a bulldozer for $228,000.The equipment has a 9-year life with a residual value of $16,000.Hartford uses the units-of-output method of depreciation,and the bulldozer is expected to yield 26,500 operating hours. (a)Calculate the depreciation expense per hour of operation. (b)The bulldozer is operated 1,250 hours in the first year,2,755 hours in the second year,and 1,225 hours in the third year of operations.Journalize the depreciation expense for each year. ​

Equipment acquired on January 2,Year 1,at a cost of $525,000 has an estimated useful life of eight years and an estimated residual value of $45,000. Required:

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.

Journalize each of the following transactions:

The accumulated depletion of a natural resource is reported​ on the

A leased asset will appear on the balance sheet as a long-term asset.