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Exam 9: Fixed Assets and Intangible Assets

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Question 71

Multiple Choice

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A capital expenditure results in a debit to

A) an expense account
B) a capital account
C) a liability account
D) an asset account

E) All of the above
F) B) and D)

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Question 72

Multiple Choice

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When determining whether to record an asset as a fixed asset, what two criteria must be met?

A) Must be an investment and must be long lived.
B) Must be long lived and must use the asset in a productive manner.
C) Must be short lived and must be a tangible asset.
D) Must be a tangible asset and must be an investment.

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

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Question 73

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Long-lived assets that are intangible in nature, used in the operations of the business, and held for sale in the ordinary course of business are called fixed assets.

Expected useful life is

Equipment with a cost of $130,000 has an estimated residual value of $10,000 and an estimated life of 5 years or 12,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 3,300 hours?

The cost of replacing an engine in a truck is an example of ordinary maintenance.

Ordinary gains from the sale of fixed assets should be reported in the other income section of the income statement.

In a lease contract, the party who legally owns the asset is the

Fixed assets are ordinarily presented in the balance sheet

Equipment with a cost of $160,000, an estimated residual value of $40,000, and an estimated life of 15 years was depreciated by the straight-line method for 4 years. Due to obsolescence, it was determined that the useful life should be shortened by 3 years and the residual value changed to zero. The depreciation expense for the current and future years is

The journal entry for recording an operating lease payment would

Capital expenditures are costs that are charged to Stockholders' Equity accounts.

A fixed asset with a cost of $41,000 and accumulated depreciation of $36,000 is traded for a similar asset priced at $50,000. Assuming a trade-in allowance of $4,000, the cost basis of the new asset is

An intangible asset is one that has a physical existence.

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

The book value of a fixed asset reported on the balance sheet represents its market value on that date.

Prepare the following journal entries and calculations:

On July 1st, Hartford Construction purchases a bulldozer for $330,000. The equipment has a 9 year life with a residual value of $15,000. Hartford uses units-of-production method depreciation and the bulldozer is expected to yield 22,500 operating hours. (a) Calculate the depreciation expense per hour of operation. (b) The bulldozer is operated 1,250 hours in the first year, 2,755 hours in the second year, and 1,225 hours in the third year of operations. Journalize the depreciation expense for each year.

A characteristic of a fixed asset is that it is

Equipment acquired on January 2, 2011 at a cost of $273,500 has an estimated useful life of eight years and an estimated residual value of $35,500. Required: (1)What was the amual amount of depreciation for the years 2011,2012 , and 2013 , assuming the straight-line method of depreciation is used? (2)What was the book value of the equipment on January 1,2014 ? (3)Assuming that the equipment was sold on J anuary 2,2014 , for $\$ 170,500$ , joumalize the entry to rec ord the sale. (4)Assuming that the equipment had been sold on J amary 2,2014 , for $\$ 189,000$ inste ad of $\$ 168,500$ , journalize the entry to record the sale.