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Exam 8: Accounting for Long-Term Operational Assets

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Question 31

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Which of the following terms is used to describe the process of expense recognition for property, plant and equipment?

A) Amortization
B) Depreciation
C) Depletion
D) Revision

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

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Question 32

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Laramie Company paid $800,000 for a purchase that included land, building, and office furniture. An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Land, $100,000, Building, $740,000, and Office Furniture, $160,000. What is the cost that should be allocated to the land?

A) $80,000
B) $70,000
C) $100,000
D) $107,000

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

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Question 33

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Goodwill may be recorded in which of the following circumstances?

When a building is purchased simultaneously with land, the purchase price must be allocated between the building and the land.

On January 1, Year 1, Dinwiddie Company purchased a car that cost $45,000. The car has an expected useful life of 5 years and a $10,000 salvage value. Which of the following statements is true?

Farmer Company purchased machine on January 1, Year 1 for $82,000. The machine is estimated to have a 5-year life and a salvage value of $4,000. The company uses the straight-line method.At the beginning of Year 4, Farmer revised the expected life to eight years. What is the annual amount of depreciation expense for each of the remaining years in the machine's life?

Anton Company paid cash to extend the life of one of its assets. Which of the following choices accurately reflects how this event would affect the financial statements?

Chico Company paid $520,000 for a basket purchase that included office furniture, a building and land. An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Office furniture, $120,000; Building, $420,000; and Land, $90,000. Based on this information, what is the cost that should be allocated to the office furniture? (Round intermediate percentage values to a whole percentage.)

On January 1, Year 1, Jefferson Manufacturing Company purchased equipment for $212,000. Jefferson paid $4,000 to have the machine installed. The equipment is expected to have a 5-year useful life and a salvage value of $26,000..a)Plant assets are classified as long-term assets, while intangible assets are treated as current assets.b)Intangible assets include patents, copyrights, and natural resources.c)Intangible assets with indefinite useful lives will be not be amortized.d)The cost of land should be depleted over its useful life.e)The cost of a natural resource should be expensed (depleted)over its useful life.

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $2,375,000. Harding paid $700,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $740,000; Building, $2,200,000 and Equipment, $1,460,000.What value will be reported for the land on the balance sheet? (Round intermediate percentage values to a whole percentage. Do not round other intermediate calculations.)

Indicate how each event affects the financial statements. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter dollar amounts.Increase = I Decrease = D Not Affected = NAOn January 1, Year 1, Jenkins Company purchased equipment for $25,000. The equipment had an estimated useful life of four years and an estimated salvage value of $5,000. Jenkins uses the straight-line method. At the beginning of Year 3, the equipment was sold for $8,000. Show how the sale affected the financial statements for Year 3, assuming Jenkins uses straight-line depreciation.

On January 1, Year 1, Friedman Company purchased a truck that cost $40,000. The truck had an expected useful life of 200,000 miles over 8 years and an $8,000 salvage value. During Year 2, Friedman drove the truck 19,000 miles. Friedman uses the units-of-production method. What is depreciation expense in Year 2? (Round your intermediate calculations to 3 decimal places.)

Anchor Company purchased a manufacturing machine with a list price of $160,000 and received a 2% cash discount on the purchase. The machine was delivered under terms free on board (FOB) shipping point, and transportation costs amounted to $2,400. Anchor paid $3,000 to have the machine installed and tested. Insurance costs to protect the asset from fire and theft amounted to $3,600 for the first year of operations. What is the cost of the machine?

Which of the following would not be classified as a tangible long-term asset?

Explain how impairment losses for intangible assets with indefinite useful lives are determined.

On January 1, Year 1, Milton Manufacturing Company purchased equipment with a list price of $32,000. A total of $3,000 was paid for installation and testing. During the first year, Milton paid $4,500 for insurance on the equipment and another $650 for routine maintenance and repairs. Milton uses the units-of-production method of depreciation. Useful life is estimated at 100,000 units, and estimated salvage value is $6,000. During Year 1, the equipment produced 12,000 units. What is the amount of depreciation for Year 1?

A trademark is a tangible asset with an indefinite useful life.

An impairment of an intangible asset decreases assets, stockholders' equity, and net income.

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,900,000. Harding paid $350,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $374,000; Building, $1,100,000 and Equipment, $726,000.What value will be reported for the building on the balance sheet?

When depreciation is recorded on equipment, Depreciation Expense is increased, and the Equipment account is decreased.