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Exam 10: Long-Term Assets: Fixed and Intangible

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Question 1

Multiple Choice

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Classify each of the following costs associated with long-lived assets as one of the following: -Costs of government permits required to develop land for a new business location

A) Buildings
B) Machinery and equipment
C) Land
D) Land improvements

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

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Question 2

Multiple Choice

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Match the intangible assets described with their proper classification (a-d) . ​ -McDonald's golden arches

A) Patent
B) Copyright
C) Trademark
D) Goodwill

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

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Question 3

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On July 1, Andrew Company purchased equipment at a cost of $150,000 that has a depreciable cost of $120,000 and an estimated useful life of three years or 60,000 hours.​Using straight-line depreciation, prepare the journal entry to record depreciation expense for (a) the first year, (b) the second year, and (c) the last year.

Weber Company purchased a mining site for $1,750,000 on July 1. The company expects to mine ore for the next 10 years and anticipates that a total of 400,000 tons will be recovered. The estimated residual value of the property is $150,000. During the first year, the company extracted 6,500 tons of ore. The depletion expense is

The normal balance of the accumulated depreciation account is a debit.

Match each account name to the financial statement section (a-i) in which it would appear. -Depreciation Expense

Intangible assets differ from property, plant, and equipment assets in that they lack physical substance.

An asset was purchased for $58,000 and originally estimated to have a useful life of 10 years with a residual value of $3,000. After two years of straight-line depreciation, it was determined that the remaining useful life of the asset was only two years with a residual value of $2,000. (a) Determine the amount of the annual depreciation for the first two years. (b) Determine the book value at the end of Year 2. (c) Determine the depreciation expense for each of the remaining years after revision.

Fixed assets are ordinarily presented on the balance sheet

Eagle Country Club has acquired a lot to construct a clubhouse. Eagle had the following costs related to the construction:​ $\begin{array}{lr}\text { Architects' fees } & 45,000 \\\text { Construction labor } & 80,000 \\\text { Engineers' fees } & 15,000 \\\text { Fences around building } & 9,000 \\\text { Grading and leveling } & 10,000 \\\text { Insurance costs incurred during construction } & 7,000 \\\text { Interest on money borrowed for construction } & 5,000 \\\text { Land } & 73,000 \\\text { Buil ding materials } & 237,000 \\\text { Sales taxes } & 6,000 \\\text { Trees and shrubs } & 6,000\end{array}$ Determine the cost of the club house to be reported on the balance sheet.

Match the intangible assets described with their proper classification (a-d) . ​ -Nike swoosh

Classify each of the following as: -Overhauling an engine in a large truck

The amount of the depreciation expense for the second full year of use of a fixed asset costing $100,000, with an estimated residual value of $5,000 and a useful life of four years, is $25,000 by the double-declining-balance method.

On December 31, it was estimated that goodwill of $65,000 was impaired. On July 1, a patent with an estimated useful economic life of 10 years was acquired for $60,000. (a)Journalize the adjusting entry on December 31 for the impaired goodwill. (b)Journalize the adjusting entry on December 31 for the amortization of the patent rights.

Residual value is not incorporated in the initial calculations for double-declining-balance depreciation.

The depreciable cost of a building is the same as its acquisition cost.

Expenditures that increase operating efficiency or capacity for the remaining useful life of a fixed asset are called capital expenditures.

The difference between the balance in a fixed asset account and its related accumulated depreciation account is the asset's book value.

Bacon Company acquired new machinery with a price of $15,200 by trading in similar old machinery and paying $12,700. The old machinery originally cost $9,000 and had accumulated depreciation of $5,000. In recording this transaction, Bacon Company should record

Land acquired as a speculation is reported under Investments on the balance sheet.