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Exam 8: Long-Term Assets

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Question 71

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A company purchased mining property that containing 15,000,000 tons of ore for $4,875,000.In 2012,the company mined and sold 789,000 tons of ore and in 2013,it mined and sold 1,235,000.Calculate the depletion expense for 2012 and 2013.

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$4,875,000/15,000,000 tons = $...

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Question 72

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A company recently paid $1,500,000 to buy a building with an estimated useful life of 20 years and a salvage value of $25,000.Calculate the depreciation expense for the third year after acquisition using the double-declining-balance depreciation.

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_TB6312_00_TB6312_00...

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Question 73

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Explain the difference between revenue expenditures and capital expenditures and how they are recorded in the accounting system.

A company purchased a music distributor's collection of lyrics and songs for $1,425,000.The copyrights are expected to last another 30 years.Prepare the journal entry to record the amortization expense for the first year.

The most frequently used method of depreciation is the straight-line method.

Classify each of the following items as a current liability, long-term liability, or not a liability:

_____________________ is an estimate of an asset's value at the end of its useful life.

Match each of the following terms with the appropriate definitions.

When originally purchased,a vehicle had an estimated useful life of eight years.The vehicle cost $23,000 and its estimated salvage value is $1,500.After four years of straight-line depreciation,the asset's total estimated useful life was revised from eight years to six years and there was no change in the estimated salvage value.The depreciation expense in year 5 equals:

Ordinary repairs are expenditures that keep assets in normal,good operating condition.

The going-concern principle supports the reporting of plant assets at book value rather than market value.

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

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

A company purchased and installed a machine on January 1,2010,at a total cost of $72,000.Straight-line depreciation was calculated based on the assumption of a five-year life and no salvage value.The machine was disposed of on July 1,2013. a.Prepare the general journal entry to update depreciation to July 1,2013. b.Prepare the general journal entry to record the disposal of the machine under each of these three independent situations: (1)The machine was sold for $22,000 cash. (2)The machine was sold for $15,000 cash. (3)The machine was totally destroyed in a fire and the insurance company settled the claim for $18,000 cash.

Decision makers and other users of financial statements are especially interested in evaluating a company's ability to use its assets in generating sales.

_____________________ depreciation uses a depreciation rate that is a multiple of the straight-line rate and applies it to an asset's beginning-of-period book value.

On April 1,2013,a company discarded a machine that had cost $10,000 and had accumulated depreciation of $8,000 as of December 31,2012.The asset had a five-year life and no salvage value.Prepare the journal entries to record the updating of the depreciation expense and discarding of this asset.

An asset's cost includes all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use.

Amortization:

The purchase of a property that included land,building,and improvements is called a lump-sum purchase.