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Exam 9: Long Term Assets

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Question 71

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On January 1,2008,North Side Manufacturing Company purchased for $40,000 a machine that will produce an estimated 75,000 units of Product X.The machine has an estimated useful life of four years and an estimated residual value of $8,000.Calculate the following amounts,rounding answers to the nearest dollar: (a)the carrying value of the machine after it has been used for three and one-half years,under the straight-line method; (b)depreciation expense for 2010,under the production method (assume that 13,000 units were produced that year); and (c)accumulated depreciation at the end of 2009,under the double-declining-balance method.(Show your work.)

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a.$12,000 ($40,000 - $8,000 = $32,000 ÷ ...

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Question 72

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A capital expenditure results in a debit to a(n)

A) expense account.
B) capital account.
C) asset account.
D) liability account.

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

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Question 73

Multiple Choice

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All of the following are needed for the computation of depreciation except

How is Accumulated Depletion disclosed in the financial statements?

Which of the following statements is not true about depreciation for tax purposes?

Speedy Printing purchased a new printing press for $80,000.It depreciates the press over a five-year period,using the double-declining-balance method of depreciation.If the press has an $8,000 estimated residual value,calculate depreciation expense for each of the five years.(Show your work.)

The term used to describe the allocation of the cost of an intangible asset to the periods it benefits is

When disposing of equipment,Accumulated Depreciation is debited for the existing carrying value.

The costs associated with the development of software,for sale or internal use,should be expensed in the period incurred.

Which of the following is not classified properly as property,plant,and equipment?

The construction of a new wing on an existing building is described as a(n)

Press Corporation purchased a truck for $40,000.The company expected the truck to last four years or 100,000 miles,with an estimated residual value of $4,000 at the end of that time.During the second year,the truck was driven 27,500 miles.Compute the depreciation for the second year under each of the following methods: (a)straight-line,(b)production,and (c)double-declining-balance.(Show your work.)

One argument in favor of accelerated depreciation is that repair expense is likely to be greater in later years.

The exclusive right to sell a product within a certain geographic area is called a

The expensing of a long-lived asset such as a wastebasket is justified by which of the following accounting rules or principles?

Normally,depreciation calculations are based on the exact number of days the asset is held during the period.

On January 1,2009,Pung Manufacturing Company purchased for $94,000 a machine that will produce an estimated 75,000 units of Product X.The machine has an estimated useful life of five years and an estimated residual value of $4,000.Calculate the following amounts: (a)the carrying value of the machine after it has been used for three and one-half years,under the straight-line method; (b)depreciation expense for 2010,under the production method (assume that 13,000 units were produced that year); and (c)accumulated depreciation at the end of 2010,under the double-declining-balance method.(Show your work.)

Which of the following is irrelevant in computing a machine's depreciation expense using the production method?

Licenses are properly classified as intangible assets.

An asset that cost $24,000 and has accumulated depreciation of $18,000 is sold for $5,200.The entry to record the sale is: