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Exam 8: Accounting for Long-Term Operational Assets

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Question 31

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Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts.Enter only one letter for each element. -On May 16,2016,Zirkle Corporation found it necessary to recognize an impairment loss of $50,000 of goodwill.The goodwill was originally recorded two years earlier in connection with the acquisition of another company.Show how the impairment loss affected the financial statements in 2016.

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Question 32

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What type of account is Accumulated Depreciation?

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Question 33

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Intangible assets include patents,copyrights,and franchises.

Good Company paid cash to purchase mineral rights on a large parcel of land.Which of the following choices accurately reflects how this event would affect Good's financial statements?

On January 1,2016,the City Taxi Company purchased a new taxi cab for $36,000.The cab has an expected salvage value of $2,000.The company estimates that the cab will be driven 200,000 miles over its life.It uses the units of production method to determine depreciation expense.The cab was driven 45,000 miles the first year and 48,000 the second year.What would be the depreciation expense reported on the 2017 income statement and the book value of the taxi at the end of 2017?

An expenditure that improves the quality of service provided by a plant asset is added to the historical cost of the asset.

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

Anchor Company purchased a manufacturing machine with a list price of $160,000 and received a 2% cash discount on the purchase.The machine was delivered under terms FOB shipping point,and freight costs amounted to $2,400.Anchor paid $3,000 to have the machine installed and tested.Insurance costs to protect the asset from fire and theft amounted to $3,600 for the first year of operations.Based on this information,the amount of cost recorded in the asset account would be:

When using the modified accelerated cost recovery system (MACRS)the highest amount of depreciation expense will be recognized in the year the asset is acquired.

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts.Enter only one letter for each element. -Belvedere Company recognized $2,500 of depreciation expense on a delivery van.

Which of the following would be classified as a tangible asset?

Which of the following assets is not considered to have indefinite useful lives?

Madison Company owned an asset that had cost $44,000.The company sold the asset on January 1,2016 for $16,000.Accumulated depreciation on the day of sale amounted to $32,000.Based on this information,the sale would result in:

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts.Enter only one letter for each element. -The Boothe Company paid $9,000 to extend the useful life of one of its assets.How will this expenditure affect Boothe's financial statements?

Anton Company paid cash to prolong the life of one of its assets.Which of the following choices accurately reflects how this event would affect Anton's financial statements?

Sheffield Corporation purchased equipment on January 1,2016 for $100,000.Sheffield used the straight-line method of depreciation with a $12,000 salvage value and a useful life of 5-years.On January 1,2018 Sheffield sold this equipment for $70,000. Required: a)Calculate the gain or loss Sheffield should recognize from this sale. b)Prepare the journal entry to record the sale.

On January 1,2016,Warren Co.purchased a machine for $120,000.Warren estimated the useful life of the machine to be 10 years and the salvage value to be $20,000.Indicate whether each of the following statements is true or false. _____ a)Depreciation expense for 2016 under the straight-line method would be $12,000. _____ b)Depreciation expense for 2016 under the double declining method would be $24,000. _____ c)The accumulated depreciation at the end of 2017 under the straight-line method would be $20,000. _____ d)The accumulated depreciation at the end of 2017 under the double declining method would be $48,000. _____ e)The book value of the machine under both the double declining method and the straight-line method at the end of 10 years would be $20,000.

A copyright is an intangible asset with an indefinite useful life.

Late in a plant asset's useful life,the amount of depreciation that would be recorded with the double-declining balance method is less than the amount that would be recognized with straight-line depreciation.

Why do some say that the GAAP treatment of research and development puts the US at a competitive disadvantage compared to businesses in other countries?