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Exam 9: Reporting and Interpreting Long-Lived Tangible and Intangible Assets

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Question 41

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Miss Hap,the bookkeeper,forgot to record the depreciation for the year.This error will cause:

A) assets to be understated.
B) liabilities to be understated.
C) stockholders' equity to be overstated.
D) stockholders' equity to be understated.

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

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Question 42

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Use the following information for the next questions 104 and 105. A corporation using the double-declining-balance method of depreciation purchased a new machine on January 1, 2016.The machine cost $200,000, had an estimated useful life of 8 years and $25,000 residual value at the end of its useful life. -Use the information above to answer the following question.What is the balance of the Accumulated Depreciation account at the end of 2017?

A) $37,500
B) $112,500
C) $50,000
D) $87,500

E) A) and B)
F) B) and D)

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Question 43

Multiple Choice

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Which of the following statements about disposal of long-lived assets is not correct?

At the end of a depreciable asset's useful life,its book value equals its:

Your company buys a computer server that it expects to use for eight years and then sell when it upgrades to a more powerful model.The server would probably be used by the business that buys it at that time for another three years.The useful life of the server for your company is:

Choose the letter of the appropriate definition to match the term.Not all definitions will be used. Term 1._____ Amortization 2._____ Useful life 3._____ Licensing right 4._____ Least and latest rule 5._____ Component allocation 6._____ Fixed asset turnover ratio 7._____ Depreciable cost 8._____ Copyright 9._____ Depreciation schedule 10._____ Revenue expenditures Definition A.Allocating the cost of tangible assets over their limited useful life. B.Costs that are recorded as revenues. C.Asset cost minus residual value. D.Net income divided by average total assets. E.Allocating the cost of intangible assets over their limited useful life. F.Asset cost minus accumulated depreciation. G.Costs that are expensed in the period incurred. H.Grants the exclusive right to sell or use a creative work. I.A cumulative record of depreciation expense,accumulated depreciation and book value. J.An estimate of how long a company will use a particular asset. K.Net sales revenue divided by average net fixed assets. L.The principle that companies wish to pay the lowest possible tax at the last possible time. M.A contractual agreement that allows limited permission for use of a property. N.An estimate of how long a tangible asset will last before it physically wears out. O.The method whereby different parts of an asset may be depreciated over different useful lives under IFRS.

During 2016,Ambiance Company reported net revenue of $3,600,000.The company reported net fixed assets of $710,000 on January 1,2016 and net fixed assets of $890,000 on December 31,2016. Required: Part a.Calculate the fixed asset turnover ratio. Part b.Assume the 2016 fixed asset turnover ratio was lower than the 2015 ratio.Explain how an analyst might interpret this change. Part c.Describe at least one circumstance that might have caused the fixed asset turnover ratio to decline and be consistent with bad news. Part d.Describe at least one circumstance that might have caused the fixed asset turnover ratio to decline and yet be consistent with good news.

An asset's cost minus accumulated depreciation is its ______ value.

B.Darin Company purchased a truck and trailer for $54,000.The appraised values of the truck and trailer are $38,000 and $19,000,respectively.What is the amount of the cost that should be assigned to the trailer?

Which of the following will result in the recording of goodwill?

Companies with the same asset may report different amounts of depreciation in a given year for all of the following reasons,except:

When a company records depreciation it debits:

Why don't all companies use the same depreciation method?

Permission to use something in accordance with specific terms and conditions are called:

Company A uses an accelerated depreciation method while Company B uses the straight-line method.All other things being equal,during the first few years of the asset's use,Company A will show which of the following compared to Company B?

The "least and latest rule" is:

Which of the following costs associated with long-lived assets are expensed (rather than capitalized) ?

Use the following information for the next questions 104 and 105. A corporation using the double-declining-balance method of depreciation purchased a new machine on January 1, 2016.The machine cost $200,000, had an estimated useful life of 8 years and $25,000 residual value at the end of its useful life. -Use the information above to answer the following question.What is the depreciation expense for 2016?

The machine was originally purchased on January 1,2016 for $40,000.The machine was estimated to have a useful life of 5 years and no residual value.The company uses straight-line depreciation.On December 31,2017,the machine was sold for $25,000. Required: Part a.Determine the gain (loss)on disposal,if any. Part a.Prepare the journal entry to record the sale. Part b.Assuming that the company had used the double-declining balance method instead of the straight-line method,explain how this would this have affected the gain (or loss)on the sale.(Do not include any calculations.)

Which method should be used to calculate depletion for a natural resource company?