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Exam 9: Long-Term Assets: Fixed and Intangible

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Question 101

Multiple Choice

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Classify each of the following as: -Adding refrigerant to an air conditioning system

A) Ordinary maintenance and repairs
B) Asset improvements
C) Extraordinary repairs

D) None of the above
E) All of the above

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Question 102

Multiple Choice

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The following information was taken from a recent annual report of Harrison Company (in millions) : $\begin{array}{lrr}&\text { Current Year }&\text { preceding Year }\\\text { Land and buildings } & \$ 726 & \$ 361 \\\text { Machinery, equipment, and internal-use software } & 595 & 470 \\\text { Office furniture and equipment } & 94 & 81 \\\text { Other fixed assets rel ated to leases } & 760 & 569 \\\text { Accumulated depreciation and amortization } & 894 & 644\end{array}$

A) Current year: $1,281; preceding year: $1,481
B) Current year: $1,281; preceding year: $837
C) Current year: $2,175; preceding year: $837
D) Current year: $2,175; preceding year: $1,481

E) None of the above
F) All of the above

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Question 103

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On July 1, Harding Construction purchases a bulldozer for $228,000. The equipment has an 8-year life with a residual value of $16,000. Harding uses straight-line depreciation. (a) Calculate the depreciation expense and provide the journal entry for the first year ending December 31. (b) Calculate the third year's depreciation expense and provide the journal entry for the third year ending December 31. (c) Calculate the last year's depreciation expense and provide the journal entry for the last year.

A fixed asset with a cost of $30,000 and accumulated depreciation of $28,500 is sold for $3,500. What is the amount of the gain or loss on disposal of the fixed asset?

Classify each of the following costs associated with long-lived assets as one of the following: -Walkways to surround new business location

Classify each of the following costs associated with long-lived assets as one of the following: -Purchase price of land purchased for new business site

The entry to record the disposal of fixed assets will include a credit to accumulated depreciation.

For income tax purposes, most companies use an accelerated deprecation method called double declining balance.

When a company discards machinery that is fully depreciated, this transaction would be recorded with the following entry

On October 1, Sebastian Company acquired new equipment with a fair market value of $458,000. Sebastian received a trade-in allowance of $92,000 on the old equipment of a similar type and paid cash of $366,000. The following information about the old equipment is obtained from the account in the equipment ledger: Cost, $336,000; accumulated depreciation on December 31, the end of the preceding fiscal year, $220,000; annual depreciation, $20,000. Assuming the exchange has commercial substance, journalize the entries to record: (a) the current depreciation of the old equipment to the date of trade-in and (b) the exchange transaction on October 1.

Classify each of the following costs associated with long-lived assets as one of the following: -Paved parking areas at new business location

Classify each of the following costs associated with long-lived assets as one of the following: -Cost of grading and leveling land to be used for a new business site

Match the intangible assets described with their proper classification (a-d) . -Location of a company

The acquisition costs of property, plant, and equipment should include all normal, reasonable and necessary costs to get the asset in place and ready for use.

The higher the fixed asset turnover, the

Classify each of the following costs associated with long-lived assets as one of the following: -Fees paid to architect to design new office building

For each of the following fixed assets, determine the depreciation expense for Year 3: Disposal date is N/A if asset is still in use. Method: SL = straight line; DDB = double declining balance Assume the estimated life is 5 years for each asset.

Copy equipment was acquired at the beginning of the year at a cost of $72,000 that has an estimated residual value of $9,000 and an estimated useful life of 5 years. It is estimated that the machine will output an estimated 1,000,000 copies. This year, 315,000 copies were made. Determine the (a) depreciable cost, (b) depreciation rate, and (c) the units-of-output depreciation for the year.

It is necessary for a company to use the same depreciation method for all of its depreciable assets.

What is the depreciation, for the year of acquisition and for the following year of a fixed asset acquired on October 1 for $500,000, with an estimated life of 5 years, and residual value of $50,000, using the straight-line method. Assume a fiscal year ending December 31.