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Exam 8: Accounting for Long-Term Assets

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Question 91

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The original cost of a machine was $60,000. After $45,000 of depreciation was recorded, the machine was traded in on a new machine of like purpose priced at $75,000. A $10,500 trade-in allowance was received on the old machine and the balance of $64,500 was paid in cash. Prepare the general journal entry to record this trade-in.

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Question 92

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A company purchased property for $100,000. The property included a building, a parking lot and land. The building was appraised at $62,000; the land at $45,000 and the parking lot at $18,000. The value of the land that will be included in the accounting record is:

A) $0
B) $36,000
C) $42,000
D) $45,000
E) $100,000

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

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Question 93

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A new machine is expected to produce 600,000 units of product during its eight-year useful life. The machine cost $1,800,000 cash and it is estimated to have a $60,000 salvage value. If the machine produces 70,000 units of product during its first year, what is the depreciation for the first year as calculated by the units-of-production method?

A company purchased a rope-braiding machine for $190,000. The machine has a useful life of eight years and a residual value of $10,000. It is estimated that the machine could produce 750,000 units of climbing rope over its useful life. In the first year, 105,000 units were produced. In the second year, production increased to 109,000 units. Using the units-of-production method, what is the amount of depreciation that should be recorded for the second year?

Obsolescence:

A new machine is expected to produce 600,000 units of product during its eight-year useful life. The machine cost $1,800,000 cash and it is estimated to have a $60,000 salvage value. What is the first year's depreciation on the machine as calculated by the straight-line method?

A company purchased a tract of land for its natural resources at a cost of $1,500,000. It expects to mine 2,000,000 tons of ore from this land. The salvage value of the land is expected to be $250,000. The depletion expense per ton of ore is:

Plant assets are used in everyday operations of the business and have useful lives that extend over more than one accounting period.

The useful life of a plant asset is:

The Weiss Company purchased a truck for $95,000 on January 2, 2011. The truck was estimated to have a $3,000 salvage value and a four-year life. The truck was depreciated using the straight-line method. During 2013, it was obvious that the truck's total useful life would be six years rather than four and the salvage at the end of the sixth year would be $1,500. Determine the depreciation expense for the truck for the six years of its life. $\begin{array}{|l|l|}\hline {\text { Year }} & \text { Depreciation Expense } \\\hline 2011 & \\\hline 2012 & \\\hline 2013 & \\\hline 2014 & \\\hline 2015 & \\\hline 2016 & \\\hline\end{array}$

Depreciation measures the actual decline in market value of an asset.

A change in an accounting estimate is:

Explain (in detail) how to compute each of the following depreciation methods: straight-line, units-of-production, and double-declining-balance.

Heidel Co. paid $750,000 cash to buy the plant assets of Rogers Co. which went out of business. An independent appraiser assigned the following values to the assets acquired: $\begin{array}{|l|r|}\hline \text { Land } & \$ 522,000 \\\hline \text { Building } & 243,000 \\\hline \text { Equipment } & 135,000 \\\hline \text { Total } & \$ 900,000 \\\hline\end{array}$ Prepare Heidel's journal entry to record the acquisition of these assets.

The cost principle requires that an asset be recorded at the cash or cash equivalent amount that was given in exchange for it.

A company sold a machine that originally cost $100,000 for $60,000 cash. The accumulated depreciation on the machine was $40,000. The company should recognize a:

A depreciation method in which a plant asset's depreciation expense for a period is determined by applying a constant depreciation rate each period to the asset's beginning book value is called:

When a company constructs a building, the cost of the building includes materials and labor, design fees, building permits, and insurance during construction.

Extraordinary repairs are expenditures extending the asset's useful life beyond its original estimate and are capital expenditures because they benefit future periods.

A patent: