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Exam 10: Fixed Assets and Intangible Assets

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Question 71

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Prepare the following journal entries and calculations:

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Question 72

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When cities give land or buildings to a company to locate in the community, no entry is made since there is no cost to the company.

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B) False

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Question 73

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Functional depreciation occurs when a fixed asset is no longer able to provide services at the level for which it was intended.

The normal balance of the accumulated depreciation account is debit.

Fixed assets are ordinarily presented in the balance sheet

On December 31, Strike Company has decided to trade-in one of its batting cages for another one that has a cost of $500,000. The seller of the batting cage is willing to allow a trade-in amount of $11,000. The initial cost of the old equipment was $215,000 with an accumulated depreciation of $185,000. Depreciation has been taken up to the end of the year. The difference will be paid in cash. What is the amount of the gain or loss on this transaction?

Assets may be grouped according to common traits and depreciated by using a single composite rate.

When a company discards machinery that is fully depreciated, this transaction would be recorded with the following entry

Expenditures for research and development are generally recorded as

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

A number of major structural repairs completed at the beginning of the current fiscal year at a cost of $1,000,000 are expected to extend the life of a building 10 years beyond the original estimate. The original cost of the building was $6,552,000, and it has been depreciated by the straight-line method for 25 years. Estimated residual value is negligible and has been ignored. The related accumulated depreciation account after the depreciation adjustment at the end of the preceding fiscal year is $4,550,000.

The accumulated depletion account is

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

It is necessary for a company to use the same depreciation method for financial statements and for determining income taxes.

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

Golden Sales has bought $135,000 in fixed assets on January 1st associated with sales equipment. The residual value of these assets is estimated at $10,000 after they service their 4 year service life. Golden Sales managers want to evaluate the options of depreciation. (a) Compute the annual straight-line depreciation and provide the sample depreciation journal entry to be posted at the end of each of the years. (b) Write the journal entries for each year of the service life for these assets using the double- declining balance method.

Residual value is also known as all of the following except

Land acquired as a speculation is reported under Investments on the balance sheet.

When a company exchanges machinery and receives a trade-in allowance greater than the book value, this transaction would be recorded with the following entry (assuming the exchange was considered to have commercial substance) :

An estimate of the amount which an asset can be sold at the end of its useful life is called residual value.