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Exam 9: Long-Term Assets: Fixed and Intangible

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Question 21

True/False

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Minerals removed from the earth are classified as intangible assets.

A) True
B) False

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verified

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Question 22

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Select the best of the following as a fixed asset (FA), or intangible asset (IA), natural resource (NR), or none of these (N).

Premises

Responses

oil reserve

fixed asset (FA)

goodwill

none of these (N)

gold mine

intangible asset (IA)

U.S. Treasury note

natural resource (NR)

computer

patent

land used for employee parking

Premises

oil reserve

goodwill

gold mine

U.S. Treasury note

computer

patent

land used for employee parking

Responses

fixed asset (FA)

none of these (N)

intangible asset (IA)

natural resource (NR)

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Correct Answer

Premises

Responses

oil reserve

goodwill

gold mine

U.S. Treasury note

computer

patent

land used for employee parking

Premises

oil reserve

goodwill

gold mine

U.S. Treasury note

computer

patent

land used for employee parking

Responses

Question 23

Multiple Choice

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Classify each of the following as: -Installing a new air conditioning system in an old building

A copy machine acquired on May 1 with a cost of $2,545 has an estimated useful life of 3 years. Assuming that it will have a residual value of $445, determine the depreciation for the first and second year by the straight-line method. Round your answers to the nearest whole dollar.

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.

Eagle Country Club has acquired a lot to construct a clubhouse. Eagle had the following costs related to the construction: $\begin{array}{lr}\text { Architects' fees } & 45,000 \\\text { Construction labor } & 80,000 \\\text { Engineers' fees } & 15,000 \\\text { Fences around building } & 9,000 \\\text { Grading and leveling } & 10,000 \\\text { Insurance costs incurred during construction } & 7,000 \\\text { Interest on money borrowed for construction } & 5,000 \\\text { Land } & 73,000 \\\text { Buil ding Materials } & 237,000 \\\text { Sales taxes } & 6,000 \\\text { Trees and shrubs } & 6,000\end{array}$ ​ Determine the cost of the club house to be reported on the balance sheet.

A copy machine acquired with a cost of $1,410 has an estimated useful life of 4 years. It is also expected to have a useful operating life of 13,350 copies. Assuming that it will have a residual value of $75, determine the depreciation for the first year by the (a) straight-line method (b) double-declining-balance method (c) units-of-output method (4,500 copies were made the first year)

What would be the cost basis of a used machine with a purchase price of $77,000, requiring an overhaul costing $8,000, installation costs of $5,000, and special acquisition fees of $3,000?

Intangible assets differ from property, plant, and equipment assets in that they lack physical substance.

Which intangible assets are amortized over their useful life?

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

When a company sells machinery at a price equal to its book value, this transaction would be recorded with an entry that would include the following:

Xtra Company purchased a business from Argus for $96,000 above the fair value of its net assets. Argus had developed the goodwill over 12 years. How much would Xtra amortize the goodwill for its first year?

Classify each of the following costs associated with long-lived assets as one of the following: -Cost of removing an existing building to ready land for use as a new business site

Classify each of the following costs associated with long-lived assets as one of the following:

Revising depreciation estimates affects the amounts of depreciation expense recorded in past periods.

Match the intangible assets described with their proper classification (a-d) . -Rights to sell a book and make a profit

The accumulated depletion of a natural resource is reported on the

Loss from Impaired Goodwill

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.