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Exam 10: Fixed Assets and Intangible Assets

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Question 21

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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.

A) True
B) False

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Question 22

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The cost of repairing damage to a machine during installation is debited to a fixed asset account.

A) True
B) False

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Question 23

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Once the useful life of a depreciable asset has been estimated and the amount to be depreciated each year has been determined, the amounts can be changed.

The depreciation method that does not use residual value in calculating the first year's depreciation expense is

The amount of depreciation expense for a fixed asset costing $95,000, with an estimated residual value of $5,000 and a useful life of 5 years or 20,000 operating hours, is $21,375 by the units-of-production method during a period when the asset was used for 4,500 hours.

The calculation for annual depreciation using the units-of-production method is

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, would have a cost basis of

On the first day of the fiscal year, a new walk-in cooler with a list price of $58,000 was acquired in exchange for an old cooler and $44,000 cash. The old cooler had a cost of $25,000 and accumulated depreciation of $16,000. Assume the transaction has commercial substance.

During construction of a building, the cost of interest on a construction loan should be charged to an expense account.

The most widely used depreciation method is

Minerals removed from the earth are classified as intangible assets.

A fixed asset with a cost of $41,000 and accumulated depreciation of $36,500 is traded for a similar asset priced at $60,000. Assuming a trade-in allowance of $3,000, the recognized loss on the trade is

Which of the following is included in the cost of land?

Falcon Company acquired an adjacent lot to construct a new warehouse, paying $40,000 and giving a short-term note for $410,000. Legal fees paid were $13,275, delinquent taxes assessed were $14,500, and fees paid to remove an old building from the land were $15,800. Materials salvaged from the demolition of the building were sold for $6,800. A contractor was paid $890,000 to construct a new warehouse. Determine the cost of the land to be reported on the balance sheet and show your work.

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

On December 31, Strike Company has decided to discard one of its batting cages. The initial cost of the equipment was $310,000 with an accumulated depreciation of $260,000. Depreciation has been taken up to the end of the year. The following will be included in the entry to record the disposal.

A building with an appraisal value of $154,000 is made available at an offer price of $172,000. The purchaser acquires the property for $40,000 in cash, a 90-day note payable for $45,000, and a mortgage amounting to $75,000. The cost basis recorded in the buyer's accounting records to recognize this purchase is

The transfer to expense of the cost of intangible assets attributed to the passage of time or decline in usefulness is called amortization.

The entry to record the disposal of fixed assets will include a credit to accumulated depreciation.

When a company exchanges machinery and receives a trade-in allowance less than the book value, this transaction would be recorded with the following entry: