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Exam 8: Accounting for Long-Term Assets

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Question 51

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On April 1 of the current year, a company disposed of an automobile that had cost $20,000. The auto had a salvage value of $2,000 and a useful life of five years. The accounting records showed accumulated depreciation for this automobile of $8,100 as of April 1 of the current year. The asset was discarded after an accident occurred and $10,500 cash was received from an insurance claim. Prepare the journal entry to record the disposal of the automobile.

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Question 52

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Revenue expenditures are additional costs of plant assets that materially increase the assets' life or productive capabilities.

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Question 53

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

A company had net sales of $789,765 and average assets of $658,137. Calculate the company's total asset turnover.

A company purchased office equipment for $4,300 by trading in old equipment with a cost of $2,000 and that had accumulated depreciation of $1,900 as of the exchange date. The company received a $75 trade-in allowance for the old equipment with the balance of $4,225 paid in cash. Prepare the journal entry to record the exchange.

Extraordinary repairs:

A method that charges the same amount of expense over each period of the asset's useful life is called:

Cobb Corn Company purchases a large lot on which a building is located. The negotiated purchase price is $2,500,000 for the lot and the building. The company pays $71,500 in commissions and taxes. The appraisal values of each item is as follows: land $650,000, building $1,750,000, land improvements $120,000. What is the appropriate amount to be recorded in the general journal for the building?

A company sold equipment for $50,000. Total accumulated depreciation at the time of the sale was $20,000 and a loss of $10,000 was recognized on the sale. What was the original cost of the asset?

On December 31, 2013, Stable Company sold a piece of equipment that was purchased on January 1, 2008. The equipment originally cost $820,000 and has an estimated useful life of eight years. Stable uses the straight-line method of depreciation. What is the gain/loss on the sale of equipment that Stable will recognize if the equipment was sold for $230,000?

Total asset cost plus depreciation expense equals book value.

A company needed a new building. It found a suitable location with an existing old building on the land. The company reached an agreement to buy the land and the building for $960,000 cash. The old building was demolished to make way for the needed new building. Following is information regarding the demolition of the old building and construction of the new one: $\begin{array}{|l|r|}\hline \begin{array}{l}\text { Construction cost of new building including } \$ 660,000 \\\text { for parking lot }\end{array} & \$ 9,560,000 \\\hline \text { Demolition of old building } & 300,000 \\\hline \text { Proceeds from sale of salvaged materials from old building } & 120,000 \\\hline\end{array}$ Prepare a single journal entry to record the above costs assuming all transactions are paid in cash.

The units-of-production method of depreciation charges a varying amount of expense for each period of an asset's useful life depending on its usage.

A company purchased a machine valued at $66,000. It traded in an old (similar) machine for a $9,000 trade-in allowance, meaning the company paid $57,000 cash with the trade-in. The old machine cost $44,000 and had accumulated depreciation of $36,000. What is the recorded value of the new machine?

Describe the accounting for intangible assets, including their acquisition, cost allocation, and accounts involved.

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

A company purchased equipment valued at $200,000 on January 1. The equipment has an estimated useful life of six years or 5 million units. The equipment is estimated to have a salvage value of $13,400. Assuming the double declining balance method of depreciation, what is the book value at the end of the second year?

A company purchased a delivery van for $23,000 with a salvage value of $3,000 on September 1, 2010. It has an estimated useful life of five years. Using the straight-line method, how much depreciation expense should the company recognize on December 31, 2010?

January 2010, Giant Green Company pays $3,000,000 for a tract of land with two buildings on it. It plans to demolish Building 1 and build a new store in its place. Building 2 will be a company office; it is appraised at $742,000, with a useful life of 25 years and a $75,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $400,500 that are expected to last another 18 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $2,020,600. Giant Green also incurs the following additional costs: What is the amount that should be recorded for Building #1?

A company purchased mining property for $1,560,000. The property was estimated to contain 13,000,000 tons of ore. In the current year, the company removed and sold 247,000 tons of ore. Calculate the depletion expense for the current year.