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Exam 9: Long-Lived Tangible and Intangible Assets

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Question 21

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When a company sells equipment for cash on a date other than the last day of the accounting period,it must:

A) record depreciation expense for the entire accounting period during which the equipment is sold.
B) record the disposal by reducing equipment and increasing revenue;a gain or loss is reported if the decrease and increase are not equal.
C) first record depreciation expense for the period up to the date of sale,and then record the disposal by decreasing both equipment and accumulated depreciation while increasing cash;a gain or loss is reported if total assets increase or decrease.
D) record accumulated depreciation for the entire current accounting period.

E) A) and C)
F) A) and B)

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Question 22

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A company purchased 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 residual value of the land is estimated to be $250,000.What is the amount of depletion per ton of ore?

A) $0.75
B) $0.875
C) $1.14
D) $0.625

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

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Question 23

Multiple Choice

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Under the cost principle,a company capitalizes:

Use the information above to answer the following question.Assume the company decides to sell the computer system on July 1,2015 for $1,000,000.Which of the following is not true concerning the journal entry(ies) required on July 1?

Depreciation is an allocation method,not a valuation method.

The book value of a long-lived asset declines over time,assuming no additions,replacements,or extraordinary repairs.

B.Darin Company purchased a truck and trailer for $54,000.The appraised values of the truck and trailer are $38,000 and $19,000,respectively.What is the amount of the cost that should be assigned to the trailer?

If a fully depreciated asset with no residual value is retired without receiving any cash on retirement:

The fixed asset turnover is the

Intangible assets are usually amortized using the straight-line method,with no residual value.

ShadyZ Corporation uses the unit-of-production method to estimate depreciation.A new asset is purchased for $18,000 that will produce an estimated 100,000 units over its useful life.Estimated residual value is $2,000.What is the depreciation rate per unit?

A company paid $500,000 to purchase equipment and $15,000 to have the equipment delivered to and installed in the company's production facilities.Commercial use of the equipment began on May 1,2014.The estimated residual value of the equipment is $5,000.The equipment is expected to be used a total of 28,000 hours throughout its estimated useful life of six years.The company has an October 31,2014 year-end and had used the equipment a total of 11,200 hours prior to the year-end.Using the units- of- production method,what amount of depreciation expense (to the nearest thousand) would the company report for this equipment in the income statement prepared for the year-ended October 31,2014?

Your company buys a computer system from IBM for $3 million and pays IBM $200,000 to install the computer system.Your company should record:

A machine had an estimated useful life of 5 years,but after 3 years,it was decided that the original estimate of useful life should have been 10 years.At that point,the remaining cost to be depreciated should be allocated over the remaining:

The fixed asset turnover ratio measures the:

Under what circumstances should a company record an asset impairment loss?

When the amount of annual depreciation is revised because of a change in the estimated useful life of an asset,prior years' financial statements should be restated.

The MegaHit Film Studio owns a production lot and related equipment.How would MegaHit Company classify these assets on its balance sheet?

The book value of a depreciable asset can never be less than its

Your company has net sales revenue of $36 million during the year.At the beginning of the year,fixed assets are $8 million.At the end of the year,fixed assets are $10 million.What is the fixed asset turnover ratio?