Question 1

An asset was purchased for $58,000 and originally estimated to have a useful life of 10 years with a residual value of $3,000. After two years of straight line depreciation, it was determined that the remaining useful life of the asset was only 2 years with a residual value of $2,000.
a) Determine the amount of the annual depreciation for the first two years.
b) Determine the book value at the end of the 2nd year.
c) Determine the depreciation expense for each of the remaining years after revision.

Accepted Answer

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Question 2

A machine costing $57,000 with a 6-year life and $3,000 residual value was purchased January 2, 2011. Compute the yearly depreciation expense using straight-line depreciation.

Accepted Answer

The answer of A machine costing $57,000 with a 6-year...

Question 3

A machine costing $85,000 with a 5-year life and $5,000 residual value was purchased January 2, 2011. Compute depreciation for each of the five years, using the declining-balance method at twice the straight-line rate.

Accepted Answer

The answer of A machine costing $85,000 with a 5-year...

Question 4

On April 15, Compton Co. paid $1,350 to upgrade a delivery truck and $45 for an oil change. Journalize the entries for the delivery truck and oil change expenditures.

Accepted Answer

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Question 5

The term applied to the amount of cost to transfer to expense resulting from a decline in the utility of intangible assets is
A) amortization
B) depletion
C) depreciation
D) allocation

Accepted Answer

Amortization is the term used to allocate the cost of intangible assets (such as patents, copyrights, and trademarks) over their useful lives. The useful life is determined based on factors such as legal or contractual life, expected usage, and obsolescence. As the intangible asset's utility declines over time, the cost is gradually transferred from the balance sheet to the income statement as an expense. Depletion is used for natural resources, depreciation is used for tangible assets, and allocation is a more general term.

Question 6

Which intangible assets are amortized over their useful life?
A) trademarks
B) goodwill
C) patents
D) all of the above

Accepted Answer

Amortization refers to the systematic allocation of the cost of intangible assets over their useful life. Patents are an example of intangible assets that are amortized over their useful life. Trademarks and goodwill, on the other hand, are not amortized but are subject to impairment testing.

Question 7

Expenditures for research and development are generally recorded as
A) current operating expenses
B) assets and amortized over their estimated useful life
C) assets and amortized over 40 years
D) current assets

Accepted Answer

Expenditures for research and development are typically recorded as current operating expenses. This accounting treatment is because the future economic benefits of R&D are uncertain, making it difficult to capitalize these costs as assets.

Question 8

Machinery was purchased on January 1, 2010 for $51,000. The machinery has an estimated life of 7 years and an estimated salvage value of $9,000. Double-declining balance depreciation for 2011 would be
A) $10,929
B) $6,000
C) $10,500
D) $10,408

Accepted Answer

Double-declining balance depreciation method charges more depreciation in the earlier years and less in later years.

First, we need to find the depreciation rate per year, which is calculated as: 
depreciation rate = 2 / estimated life in years

depreciation rate = 2 / 7 = 0.2857 or 28.57%

Now, we can calculate the depreciation expense for 2011:

depreciation expense = book value at the beginning of the year x depreciation rate

The book value at the beginning of the year 2011 can be found as follows:

book value = cost of the asset - accumulated depreciation
Accumulated depreciation for one year is:

accumulated depreciation = cost of the asset x depreciation rate
accumulated depreciation = $51,000 x 28.57% = $14,571

book value at the beginning of 2011 = $51,000 - $14,571 = $36,429

Now we can calculate the depreciation expense for 2011:

depreciation expense = $36,429 x 28.57% = $10,408

Therefore, the double-declining balance depreciation for 2011 would be $10,408 (Option D).

Question 9

The exclusive right to use a certain name or symbol is called a
A) franchise
B) patent
C) trademark
D) copyright

Accepted Answer

Trademark is a type of intellectual property that gives the owner exclusive rights to use a particular name or symbol in connection with goods or services. Franchise and patent are other forms of intellectual property but do not relate to the exclusive right to use a name or symbol. Copyright also relates to intellectual property but pertains to the protection of original works of authorship such as books, music, and software.

Question 10

Fixed assets are ordinarily presented in the balance sheet
A) at current market values
B) at replacement costs
C) at cost less accumulated depreciation
D) in a separate section along with intangible assets

Accepted Answer

Fixed assets are generally presented in the balance sheet at cost less accumulated depreciation. This presentation method provides information about the original cost of the asset as well as the amount of wear and tear that it has incurred. It also enables investors and creditors to calculate the remaining useful life of the asset and estimate future repair or replacement costs. Therefore, option C is the best choice.

Question 11

Equipment was acquired at the beginning of the year at a cost of $75,000. The equipment was depreciated using the straight-line method based upon an estimated useful life of 6 years and an estimated residual value of $7,500.
 a)What was the depreciation expense for the first ye ar?
b)Assuming the equipment was sold at the end of the second ye ar for $ \$ 59,000 $, detemine the gain or loss on sale of the equipment. 
c)Joumalize the entry to record the sale.

Accepted Answer

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Question 12

Computer equipment was acquired at the beginning of the year at a cost of $63,000 that has an estimated residual value of $3,000 and an estimated useful life of 5 years. Determine the (a) depreciable cost (b) double-declining-balance rate, and (c) double-declining-balance depreciation for the first year.

Accepted Answer

The answer of Computer equipment was acquired at the beginning...

Question 13

What is the cost of the land, based upon the following data?
 $\begin{array}{ll}
\$ 178,000 & \text { Land purchase price } \
15,000 & \text { Broker's commission } \
& \text { Payment for the demolition } \
5,000 & \text { and removal of existing building } \
& \text { Cashreceived from the sale of materials } \
2,000 & \text { salvaged from the demolished building }
\end{array}$

Accepted Answer

The answer of What is the cost of the land,...

Question 14

Comment on the validity of the following statements. "As an asset loses its ability to provide services, cash needs to be set aside to replace it. Depreciation accomplishes this goal."

Accepted Answer

The answer of Comment on the validity of the following...

Question 15

Copy equipment was acquired at the beginning of the year at a cost of $56,000 that has an estimated residual value of $8,000 and an estimated useful life of 5 years. It is estimated that the machine has an estimated 1,000,000 copies. This year 240,000 copies were made. Determine the (a) depreciable cost, (b) depreciation rate, and (c) the units-of-production depreciation for the year.

Accepted Answer

The answer of Copy equipment was acquired at the beginning...

Question 16

Xtra Company purchased goodwill from Argus for $144,000. Argus had developed the goodwill over 6 years. How much would Xtra amortize the goodwill for its first year?
A) $8,640
B) $24,000
C) Goodwill is not amortized.
D) Not enough information.

Accepted Answer

Goodwill is not amortized under current accounting standards; instead, it is tested annually for impairment.

Question 17

On the first day of the fiscal year, a new walk-in cooler with a list price of $52,000 was acquired in exchange for an old cooler and $42,000 cash. The old cooler had a cost $24,000 and accumulated depreciation of $17,000.
 a)Determine the gain to be recorded on the exchange.
b)Joumalize the entry to recort the exchange.

Accepted Answer

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Question 18

Computer equipment was acquired at the beginning of the year at a cost of $45,000 that has an estimated residual value of $3,000 and an estimated useful life of 4 years. Determine the (a) depreciable cost, (b) straight-line rate, and (c) annual straight-line depreciation.

Accepted Answer

The answer of Computer equipment was acquired at the beginning...

Question 19

The Weber Company purchased a mining site for $500,000 on July 1, 2011. The company expects to mine ore for the next 10 years and anticipates that a total of 100,000 tons will be recovered. The estimated residual value of the property is $80,000. During 2011 the company extracted 4,000 tons of ore. The depletion expense for 2011 is
A) $10,500
B) $43,200
C) $16,800
D) $20,000

Accepted Answer

The answer of The Weber Company purchased a mining site...

Question 20

A double-declining balance rate for calculating depreciation expense is determined by doubling the straight-line rate. Assume that an asset has a useful life of 25 years, determine the rate to be used if using the double-declining balance method.

Accepted Answer

The answer of A double-declining balance rate for calculating depreciation...

Quiz 9: Fixed Assets and Intangible Assets

A machine costing $57,000 with a 6-year life and $3,000 residual value was purchased January 2, 2011. Compute the yearly depreciation expense using straight-line depreciation.

A machine costing $85,000 with a 5-year life and $5,000 residual value was purchased January 2, 2011. Compute depreciation for each of the five years, using the declining-balance method at twice the straight-line rate.

On April 15, Compton Co. paid $1,350 to upgrade a delivery truck and $45 for an oil change. Journalize the entries for the delivery truck and oil change expenditures.

The term applied to the amount of cost to transfer to expense resulting from a decline in the utility of intangible assets is

Which intangible assets are amortized over their useful life?

Expenditures for research and development are generally recorded as

Machinery was purchased on January 1, 2010 for $51,000. The machinery has an estimated life of 7 years and an estimated salvage value of $9,000. Double-declining balance depreciation for 2011 would be

The exclusive right to use a certain name or symbol is called a

Fixed assets are ordinarily presented in the balance sheet

Comment on the validity of the following statements. "As an asset loses its ability to provide services, cash needs to be set aside to replace it. Depreciation accomplishes this goal."

Xtra Company purchased goodwill from Argus for $144,000. Argus had developed the goodwill over 6 years. How much would Xtra amortize the goodwill for its first year?

Computer equipment was acquired at the beginning of the year at a cost of $45,000 that has an estimated residual value of $3,000 and an estimated useful life of 4 years. Determine the (a) depreciable cost, (b) straight-line rate, and (c) annual straight-line depreciation.

A double-declining balance rate for calculating depreciation expense is determined by doubling the straight-line rate. Assume that an asset has a useful life of 25 years, determine the rate to be used if using the double-declining balance method.