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Exam 9: Fixed Assets and Intangible Assets

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Question 111

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Prior to adjustment at the end of the year, the balance in Trucks is $300,900 and the balance in Accumulated Depreciation-Trucks is $88,200. Details of the subsidiary ledger are as follows: $\begin{array} { | l | l | l | l | l | l | } \hline \begin{array} { l } \text { Truck } \\\text { No. }\end{array} & \text { Cost } & \begin{array} { l } \text { Estimated } \\\text { Residual Value }\end{array} & \begin{array} { l } \text { Estimated } \\\text { Useful Life }\end{array} & \begin{array} { l } \text { Accumulated } \\\text { Depreciation at } \\\text { Beginning of Year }\end{array} & \begin{array} { l } \text { Miles } \\\text { Operated } \\\text { During Year }\end{array} \\\hline 1 & \$ 100,000 & \$ 13,000 & 300,000 & - & 30,000 \\\hline 2 & 72,900 & 9,900 & 300,000 & \$ 60,000 & 25,000 \\\hline 3 & 38,000 & 3,000 & 200,000 & 8,050 & 45,000 \\\hline 4 & 90,000 & 13,000 & 200,000 & 20,150 & 40,000 \\\hline\end{array}$ Required: 1) Based on the units-of-output method, determine the depreciation rates per mile and the amount to be credited to the accumulated depreciation section of each of the subsidiary accounts for the miles operated during the current year. 2) Journalize the entry to record depreciation for the year.

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1) *Mileage depreciation of $5,250 21 c...

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Question 112

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The normal balance of the accumulated depreciation account is a debit.

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B) False

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Question 113

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The calculation for annual depreciation using the straight-line depreciation method is

A fixed asset's estimated value at the time it is to be retired from service is called

When land is purchased to construct a new building, the cost of removing any structures on the land should be charged to the building account.

Match each account name to the financial statement section a-i) in which it would appear. -Loss on Disposal of Asset

Patents are exclusive rights to produce and sell goods with one or more unique features.

Computer equipment was acquired at the beginning of the year at a cost of $57,000 that has an estimated residual value of $9,000 and an estimated useful life of 5 years. Determine the second-year depreciation using the straight- line method.

Classify each of the following costs associated with long-lived assets as one of the following: -Purchase price of land purchased for new business site

A machine with a cost of $75,000 has an estimated residual value of $5,000 and an estimated life of 4 years or 18,000 hours. What is the amount of depreciation for the second full year, using the double-declining-balance method?

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

Residual value is not incorporated in the initial calculations for double-declining-balance depreciation.

The cost of a patent with a remaining legal life of 10 years and an estimated useful life of 7 years is amortized over 10 years.

The following information was taken from a recent annual report of Harrison Company in millions): Required: 1) Compute the book value of the fixed assets for the current year and the preceding year and explain the differences, if any. 2) Would you normally expect the book value of fixed assets to increase or decrease during the year?

When exchanging equipment, if the trade-in allowance is greater than the book value a loss results.

Carter Co. acquired drilling rights for $18,550,000. The oil deposit is estimated at 74,200,000 gallons. During the current year, 6,000,000 gallons were drilled. Journalize the adjusting entry at December 31 to recognize the depletion expense. Journal $\begin{array} { | c | l | c | c | c | } \hline \text { Date } & \text { Description } & \begin{array} { c } \text { Post. } \\\text { Ref. }\end{array} & \text { Debit } & \text { Credit } \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline\end{array}$

Which of the following should be included in the acquisition cost of a piece of equipment?

The amount of the depreciation expense for the second full year of use of a fixed asset costing $100,000, with an estimated residual value of $5,000 and a useful life of 4 years, is $25,000 by the double-declining-balance method.

When the amount of use of a fixed asset varies from year to year, the method of determining depreciation expense that best matches allocation of cost with revenue is

Classify each of the following costs associated with long-lived assets as one of the following: -Freight costs paid on purchase of new equipment