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Exam 9: Long-Term Assets: Fixed and Intangible

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Question 1

True/False

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When depreciation estimates are revised, all years of the asset's life are affected.

A) True
B) False

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False

Question 2

Multiple Choice

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A lathe priced at a fair market value of $124,000 is acquired in a transaction that has commercial substance by trading in a similar lathe and paying cash for the difference between the trade-in allowance of $45,000 and the price of the new lathe. Assuming that the book value of the lathe traded in is $36,000, what is the gain or loss on the exchange?

A) gain of $9,000
B) gain of $12,000
C) loss of $9,000
D) loss of $12,000

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

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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 3 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.

Computer equipment was acquired at the beginning of the year at a cost of $65,000 that has an estimated residual value of $3,800 and an estimated useful life of 8 years. Determine the (a) depreciable cost, (b) straight-line rate, and (c) annual straight-line depreciation.

Long-lived assets held for sale are classified as fixed assets.

Classify each of the following as: -Paving a new parking lot

Costs associated with normal research and development activities should be treated as intangible assets.

A building with an appraisal value of $154,000 is made available at an offer price of $172,000. The purchaser acquires the property for $40,000 in cash, a 90-day note payable for $45,000, and a mortgage amounting to $75,000. The cost basis recorded in the buyer's accounting records to recognize this purchase is

Williams Company acquired machinery on July 1, Year 1, at a cost of $130,000. The estimated useful life of the machinery was 10 years and the estimated residual value was $10,000. Williams uses the double-declining-balance method of depreciation. On October 1, Year 4, Williams sold the equipment for $75,000. (a) Record the journal entry for the depreciation on this machinery for Year 4. (b) Record the journal entry for the sale of the machinery.

Classify each of the following costs associated with long-lived assets as one of the following: -Outdoor lighting at new business location

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

When selling a piece of equipment for cash, a loss will result when the proceeds of the sale are less than the book value of the asset.

Match the intangible assets described with their proper classification (a-d) . -McDonald's Golden Arches

Classify each of the following as:

All of the following are needed for the calculation of straight-line depreciation except

When old equipment is traded in for a new equipment, the difference between the list price and the trade in allowance is called boot.

Classify each of the following costs associated with long-lived assets as one of the following: -Cost of insurance during the construction of new office building

Match the intangible assets described with their proper classification (a-d) . -iTunes music

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

If a fixed asset with a book value of $10,000 is traded for a similar fixed asset, a trade-in allowance of $15,000 is granted by the seller, and the transaction is deemed to have commercial substance, the buyer would report a gain on exchange of fixed assets of $5,000.