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Exam 8: Accounting for Long-Term Operational Assets

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Question 41

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When reporting to the Internal Revenue Service companies are most likely to use

A) an accelerated depreciation.
B) straight-line depreciation.
C) reverse accelerated depreciation.
D) units-of-production depreciation.

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

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Question 42

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On January 1, Year 1, Marino Moving Company paid $64,000 cash to purchase a truck. The truck was expected to have a four-year useful life and a $4,000 salvage value. If Marino uses the straight-line method, the amount of depreciation expense recognized on the Year 2 income statement is

A) $16,000
B) $32,000
C) $15,000
D) $10,000

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

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Question 43

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Which of the following terms is used to describe long-term assets that have no physical substance and provide rights, privileges and special opportunities to businesses?

Renewable Energies, Incorporated (REI) paid $100,000 to purchase a windmill. The windmill was expected to have a 10-year useful life and a $30,000 salvage value. At the beginning of the fifth year of operation, REI changed the estimated useful life from 10 years to 14 years. Assuming the Company uses the straight-line method, the amount of accumulated depreciation on the Year 6 balance sheet would be

Explain how the gain or loss is computed on the sale of a piece of equipment.

Give an example of an intangible asset with an identifiable useful life.

Renewable Energies, Incorporated (REI) paid $100,000 to purchase a windmill. The windmill was expected to have a 10-year useful life and a $30,000 salvage value. At the beginning of the fifth year of operation, REI changed the estimated useful life from 10 years to 14 years. Assuming the Company uses the straight-line method, the amount of depreciation expense on the Year 5 income statement would be

The balance sheet of Flo's Restaurant showed total assets of $700,000, liabilities of $240,000 and stockholders' equity of $460,000. An appraiser estimated the fair value of the restaurant assets at $840,000. If Alice Company pays $1,185,000 cash for the restaurant, what is the amount of goodwill?

On January 1, Year 1, Phoenix Corporation purchased a delivery truck for $45,000. The estimated useful life of the truck is 5 years, with an estimated salvage value of $9,000. The truck is expected to be driven 200,000 miles during its useful life. Required: a)Phoenix uses double-declining-balance depreciation.(1)What is the amount of depreciation for Year 1?(2)What is the balance of the accumulated depreciation account at the end of Year 2?b)Refer to part a. Assume Phoenix used double-declining-balance depreciation and sold the truck at the beginning of Year 3 for $18,000. What is the amount of the gain or loss on the sale of the delivery van?c)Assume that Phoenix used the units-of-production method instead. The delivery van was driven 50,000 miles the first year and 40,000 miles the second year.(1)What is the amount of depreciation expense for Year 1?(2)What is the amount of depreciation expense for Year 2?(3)What is the book value of the van at the end of Year 2?

At the end of the current accounting period, Ringgold Company recorded depreciation of $15,000 on its equipment. What is the effect of this event on the company's balance sheet?

Which of the following statements is true concerning the modified accelerated cost recovery system (MACRS) for the recognition of depreciation expense, for tax purposes?

On January 1, Year 1, Li Company purchased an asset that cost $80,000. The asset had an expected useful life of five years and an estimated salvage value of $16,000. Li uses the straight-line method for the recognition of depreciation expense. At the beginning of the fourth year, the company revised its estimated salvage value to $8,000. What is the amount of depreciation expense to be recognized during Year 4?

On March 1, Bartholomew Company purchased a new stamping machine with a list price of $34,000. The company paid cash for the machine; therefore, it was allowed a 5% discount. Other costs associated with the machine were: transportation costs, $550; sales tax paid, $1,360; installation costs, $450; routine maintenance during the first month of operation, $500. What is the cost of the machine?

On January 1, Year 2, Ruiz Company spent $850 on a plant asset to improve its quality. Which of the following correctly shows the effects of the Year 2 expenditure on the financial statements?

On January 1, Year 1, Jing Company purchased office equipment that cost $34,000 cash. The equipment was delivered under terms free on board (FOB) shipping point, and transportation cost was $2,000. The equipment had a five-year useful life and a $12,000 expected salvage value.Assuming the company uses the double-declining-balance depreciation method, what are the amounts of depreciation expense and accumulated depreciation, respectively, that would be reported in the financial statements prepared as of December 31, Year 3?

Expenditures that extend the useful life of a plant asset increase the accumulated depreciation on the asset.

Which of the following would most likely not be expensed using the straight-line method?

Indicate how each event affects the financial statements. Use the following letters to record your answer in the box shown below. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter dollar amounts.Increase = I Decrease = D Not Affected = NAGulfshore Oil Company recognized $2,000,000 of depletion expense related to an oil reserve.

On January 1, Year 1, Marino Moving Company paid $64,000 cash to purchase a truck. The truck was expected to have a four year useful life and a $4,000 salvage value. If Marino uses the straight-line method, which of the following shows how the adjusting entry to recognize depreciation expense at the end of Year 3 will affect the Company's financial statements?

The balance sheet of Flo's Restaurant showed total assets of $600,000, liabilities of $160,000 and stockholders' equity of $440,000. An appraiser estimated the fair value of the restaurant assets at $680,000. If Alice Company pays $770,000 cash for the restaurant, what is the amount of goodwill?