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Exam 8: Accounting for Long-Term Assets

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Question 41

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A company used straight-line depreciation for an item of equipment that cost $12,000, had a salvage value of $2,000 and a five-year useful life. After depreciating the asset for three complete years, the salvage value was reduced to $1,200 but its total useful life remained the same. Determine the amount of depreciation to be charged against the equipment during each of the remaining years of its useful life:

A) $1,000.
B) $1,800.
C) $5,400.
D) $2,400.
E) $2,000.

F) B) and E)
G) A) and E)

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Question 42

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Explain how to calculate total asset turnover. Describe what it reveals about a company's financial condition, whether a higher or lower ratio is desirable, and how it is best applied for comparative purposes.

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Total asset turnover is calculated by di...

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Question 43

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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 $35,000, and the parking lot at $18,000. Land should be recorded in the accounting records with an allocated cost of:

What are some of the variables that make a plant asset's useful life difficult to predict?

A leasehold refers to the rights the lessor grants to the lessee under the terms of the lease.

The process of allocating the cost of a plant asset to expense in the accounting periods benefiting from its use is called depletion.

The Modified Accelerated Cost Recovery System (MACRS) is part of the U.S. federal income tax laws and may be used for financial reporting.

The going concern assumption supports the reporting of plant assets at undepreciated cost (book value) rather than market value.

The double-declining balance method is applied by (1) computing the asset's straight-line depreciation rate, (2) doubling it, (3) subtracting salvage value from cost, and (4) multiplying the rate times the net value.

An asset can be disposed of by all of the following except:

Which of the following would be classified as a natural resource?

Define plant assets and identify the four primary issues in accounting for them.

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. If 150,000 tons of ore are mined during the first year, the journal entry to record the depletion is:

Which of the following are not classified as plant assets?

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

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

The cost of an intangible asset is systematically allocated to depreciation expense over its estimated useful life.

Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $87,000. The machine's useful life is estimated to be 5 years, or 400,000 units of product, with a $7,000 salvage value. During its second year, the machine produces 84,500 units of product. Determine the machines' second year depreciation under the straight-line method.

Intangible assets are nonphysical assets used in operations that confer on their owners' long-term rights, privileges, or competitive advantages.

A trademark is an exclusive right granted to its owner to publish and sell a musical, literary, or artistic work during the life of the creator plus 70 years.