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Exam 7: Long-Term Assets

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Question 21

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Bahama Catering purchased a commercial dishwasher by paying cash of $8,000.The dishwasher's fair value on the date of the purchase was $10,000.The company incurred $600 in transportation costs,$500 installation fees,and paid $300 annual insurance of the equipment.For what amount will Bahama record the dishwasher?

A) $10,000.
B) $9,100.
C) $8,000.

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

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Question 22

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A more comparable measure of profitability than income is return on assets,which equals net income divided by average total assets.

A) True
B) False

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Question 23

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Career Services,Incorporated sold some office equipment for $52,000 on December 31,2018.The journal entry to record the sale would include which of the following if the original cost of the equipment was $80,000 with a residual value of $5,000 and a useful life of 10 years? Assume the machine was purchased on January 1,2015 and depreciated using the straight-line method.

The balance sheet of Hidden Valley Farms reports total assets of $450,000 and $550,000 at the beginning and end of the year,respectively.Net income and sales for the year are $100,000 and $800,000,respectively.What is Hidden Valley's asset turnover?

Real Angus Steakhouse purchased land for $75,000 cash.They also incurred commissions of $4,500,property taxes of $5,000,and title insurance of $800.The $5,000 in property taxes includes $4,000 in back taxes paid by Real Angus on behalf of the seller and $1,000 due for the current year after the purchase date.For what amount should Real Angus Steakhouse record the land?

The factors used to compute depreciation expense are an asset's:

The balance sheet of Purdy's BBQ reports total assets of $800,000 and $900,000 at the beginning and end of the year,respectively.Net income and sales for the year are $85,000 and $1,700,000,respectively.What is Purdy's return on assets?

Goodwill is:

International accounting standards allow firms to record development costs that benefit future periods as an intangible asset.

During the first two years,Supplies,Inc.drove the company truck 15,000 and 22,000 miles,respectively,to deliver merchandise to its customers.The company originally purchased the truck for $175,000.If the truck has an estimated life of 10 years or 300,000 miles,with an estimated residual value of $25,000,what amount of deprecation expense should Supplies,Inc.record in the second year using the activity-based method?

Kansas Enterprises purchased equipment for $60,000 on January 1,2018.The equipment is expected to have a five-year life,with a residual value of $5,000 at the end of five years.Using the double-declining balance method,depreciation expense for 2018 would be:

ABO purchased a truck at the beginning of 2018 for $140,000.They sold the truck at the end of 2019 for $95,000.If the expected useful life of the truck was six years with a residual value of $20,000 and ABO uses straight-line depreciation,which of the following is true regarding the entry to record the sale of the truck?

Oregon Adventures purchased equipment for $80,000.They sold the equipment at the end of three years for $45,000.If the expected useful life of the equipment was seven years with a residual value of $10,000,and they use straight-line depreciation,which of the following is true regarding the entry to record the sale of the equipment?

Which of the following would not be recorded as land improvements?

In an activity-based depreciation method,we allocate an asset's cost based on its use.

Land improvements are recorded separately from the land itself because,unlike land,these assets are subject to depreciation.

Taking a "big bath" is recording all losses in one year to make a bad year even worse.

C-Stop reports the following information at year-end: Based on the above information,what is the total amount of impairment loss that C-Stop should record at year end? $\begin{array} { | l | r | r | r | } \hline & \text { Book Value } & \begin{array} { r } \text { Estimated } \\\text { Cash Flows }\end{array} & \text { Fair Value } \\\hline \text { Building } & \$ 500,000 & \$ 380,000 & \$ 360,000 \\\hline \text { Patent } & \$ 35,000 & \$ 40,000 & \$ 38,000 \\\hline \text { Copyright } & \$ 40,000 & \$ 38,000 & \$ 39,000 \\\hline \text { Machine } & \$ 100,000 & \$ 120,000 & \$ 85,000 \\\hline\end{array}$

In testing for impairment of an operational asset,an impairment loss is required if the:

The Accumulated Depreciation account allows us to reduce the carrying value of assets through depreciation,while maintaining the original cost of each asset in the accounting records.