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Exam 10: Long-Term Assets: Fixed and Intangible

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Question 101

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Champion Company purchased and installed carpet in its new general offices on March 31 for a total cost of $18,000. The carpet is estimated to have a 15-year useful life and no residual value.​ (a)Prepare the journal entries necessary for recording the purchase of the new carpet. (b)​Record the December 31 adjusting entry for the partial-year depreciation expense for the carpet assuming that Champion Company uses the straight-line method.

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Question 102

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Classify each of the following as: -New landscaping

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 103

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Equipment costing $80,000 with a useful life of 10 years and a residual value of $8,000 has been depreciated for six years by the straight-line method. Assume a fiscal year ending December 31. (a)What is the book value at the end of the sixth year of use? (b)If early in the seventh year it is estimated that the remaining useful life is five years (instead of four) and the residual value is $6,000, what is the amount of depreciation for the seventh year?

The amount of depreciation expense for the first full year of use of a fixed asset costing $95,000, with an estimated residual value of $5,000 and a useful life of five years, is $19,000 by the straight-line method.

A machine costing $57,000 with a six-year life and $54,000 depreciable cost was purchased January 1. Compute the yearly depreciation expense using straight-line depreciation.

In a lease contract, the party who legally owns the asset is the

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

The cost of computer equipment does not include the consultant's fee to supervise installation of the equipment.

A machine with a cost of $120,000 has an estimated residual value of $15,000 and an estimated life of five years or 15,000 hours. It is to be depreciated by the units-of-activity method. What is the amount of depreciation for the second full year, during which the machine was used 5,000 hours?

The amount of depreciation expense for a fixed asset costing $95,000, with an estimated residual value of $5,000 and a useful life of five years or 20,000 operating hours, is $21,375 by the units-of-activity method during a period when the asset was used for 4,500 hours.

Match each account name to the financial statement section (a-i) in which it would appear. -Loss from Impaired Goodwill

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

Comment on the validity of the following statements. "As an asset loses its ability to provide services, cash needs to be set aside to replace it. Depreciation accomplishes this goal."

The double-declining-balance method of depreciation uses a declining percentage rate in determining the depreciation amount.

Fill in the missing numbers using the formula for fixed asset turnover:​ $\begin{array} { | l | r | r | r | r | } \hline & \text { Company A } & \text { Company B } & \text { Company C } & \text { Company D } \\\hline \text { Sales } & \$ 5,000,000 & \$ 720,000 & \$ 900,000 & ? \\\hline \text { Beginning fixed assets } & \$ 450,000 & \$ 275,000 & ? & \$ 380,000 \\\hline \text { Ending fixed assets } & \$ 800,000 & ? & \$ 310,000 & \$ 420,000 \\\hline \text { Fixed asset turnover } & ? & 2.4 & 3.0 & 2.6 \\\hline\end{array}$

An exchange is said to have commercial substance if future cash flows remain the same as a result of the exchange.

The name, term, or symbol used to identify a business and its products is called

Expected useful life is

The transfer to expense of the cost of intangible assets attributed to the passage of time or decline in usefulness is called amortization.

The cost of new equipment is called a revenue expenditure because it will help generate revenues in the future.