B?ukala ?Inc., purchased a tract of? land, a small office? building, and some equipment for $1,700,000. The appraised value of the land was $1,100,000?, the building $660,000?, and the equipment $440,000. What is the cost of the? land?
answer
$850,000
question
Select all costs associated with the expenditures included in the largest two categories of property and equipment. ?(Select all that? apply.)
A. Costs incurred to bring the asset to its intended use
B. Original cost of each asset
C. Taxes, commissions and other amounts paid to bring the asset ready for use
D. Repairs and maintenance necessary to maintain the asset or restore it to working order
answer
A, B, & C
question
Book value is less than cost because
__________________ is/are ______________ cost to compute book value.
answer
accumulated depreciaton, subratced from
question
Which of the following is not a capital? expenditure?
A. The addition of a building wing
B. Replacement of an old motor with a new one in a piece of equipment
C. A? tune-up of a company vehicle
D. A complete overhaul of an? air-conditioning system
E. The cost of installing a piece of equipment
answer
A tune-up of a company vechile
question
A capital expenditure
answer
adds to an asset - definition "increases the asset's capacity or extends its useful life" (longer than a year)
question
Which of the following items should be accounted for as a capital? expenditure?
answer
Taxes paid in conjunction with the purchase of office equipment
question
DDB
answer
Double Declining Depreciation
question
Which statement is? false?
A. The cost of a plant asset minus accumulated depreciation equals the? asset's book value.
B. Depreciation is based on the expense recognition principle because it apportions the cost of the asset against the revenue generated over the? asset's useful life.
C. Depreciation creates a fund to replace the asset at the end of its useful life.
D. Depreciation is a process of allocating the cost of a plant asset over its useful life.
answer
Depreciation creates a fund to replace the asset at the end of its useful life.
question
Book Value Equation
answer
Book Value = Cost - Accumulated Depreciation
question
Why would a business select an accelerated method of depreciation for tax? purposes?
answer
Accelerated depreciation generates higher depreciation expense? immediately, and therefore lowers tax payments in the early years of the? asset's life.
question
Which statement about depreciation is false?
A. Obsolescence, as well as physical wear and tear, should be considered when determining the period over which an asset should be depreciated.
B. A major objective of depreciation accounting is to allocate the cost of using an asset against the revenues it helps to generate.
C. Depreciation is a process of allocating the cost of an asset to expense over its useful life.
D. Depreciation should not be recorded in years in which the market value of the asset has increased.
answer
Depreciation should not be recorded in years in which the market value of the asset has increased.
question
Kline Company failed to record depreciation of equipment. How does this omission affect Kline?'s financial? statements?
A.
Net income is overstated and assets are understated.
B.
Net income is understated and assets are understated.
C.
Net income is overstated and assets are overstated.
D.
Net income is understated and assets are overstated.
answer
Net income is overstated and assets are overstated.
question
Acton?, ?Inc., uses the? double-declining-balance method for depreciation on its computers. Which item is not needed to compute depreciation for the first? year?
answer
Estimated Residual Value
question
On October 1,2016?, anywhere Communications purchased a new piece of equipment that cost $60,000. The estimated useful life is 55 years and estimated residual value is $5,000. Assume that Anywhere uses the? straight-line method of depreciation and sells the equipment for $25,000 on October ?1, 2020. The result of the sale of the equipment is a gain? (loss) of...
answer
$9,000
question
Maxell Company purchased a machine for $11,200 on January? 1, 2016. The machine has been depreciated using the? straight-line method over a 5?-year life with a $1,600 residual value. Maxell sold the machine on January? 1,2018?, for $7,800. The book value as of December? 31, 2017 is $7,360. What gain or loss should Maxell record on the? sale?
A. Loss, $440
B. Gain, $1,800
C. Loss, $1,480
D. Gain, $ 440
answer
D. Gain, $440
question
Which of the following assets is not subject to a decreasing book value through? depreciation, depletion, or? amortization?
A. Land improvements
B. Natural resources
C. Goodwill
D. Intangibles
answer
Good will
question
A company purchased an oil well for $360,000. It estimates that the well contains 60,000 ?barrels, has an? eight-year life, and no salvage value. If the company extracts and sells 2,000 barrels of oil in the first? year, how much in cost of sales should be? recorded?
answer
12,000
360000/60000=6
6x2,000=12,000
question
Which item among the following is not an intangible? asset?
A. A trademark
B. Goodwill
C. A patent
D. A copyright
E. All of the above are intangible assets.
answer
All of the above are intangible assets!!
question
Suppose ShipEx pays $64 million to buy Guaranteed Overnight. The fair value of Guaranteed's assets is $70 ?million, and the fair value of its liabilities is $21 million. How much goodwill did ShipEx purchase in its acquisition of Guaranteed ?Overnight?
answer
15 million
question
A company purchased mineral assets costing $860,000, with an estimated residual value of $74,100?, and holding approximately 290,000 tons of ore. During the first? year, 66,700 tons are extracted and sold. What is the amount of depletion for the first? year? ?(Round intermediary calculations to seven decimal places as? needed, X.XXXXXXX and your final answer to the nearest whole? dollar.)
answer
180,757
question
Which of the following costs are reported on a? company's income statement and balance? sheet?
Income Statement
Balance Sheet
A.Gain on sale of land
Cost of goods sold
B.Cost of goods sold
Accumulated depreciation
C.Goodwill
Accounts payable
D.Accumulated depreciation
Land
answer
B. cost of goods sold (income statement)
Accumulated depreciation (balance sheet)
question
Paid property taxed of $75,000 for the first year the new building is occupied...
answer
Expense
question
Paid interest on construction note for new plant building, $550,000...
answer
Capital Expenditure
question
Repaired plumbing in main plant, paying $270,000 cash...
answer
Expense
question
Purchased equipment for new manufacturing plant, $6,000,000; financed with long-tern note...
answer
Capital Expenditure
question
Paid dividends for $40,000...
answer
Neither
question
Purchased a computer and peripheral equipment for $29,000 cash...
answer
Capital Expenditure
question
Paved a parking lot for leasing property for $300,000...
answer
Capital Expenditure
question
Paid $90,000 in cash for installation for equipment in (4)...
answer
Capital Expenditure
question
Paid $148,000 to tear down old building to new plant site...
answer
Capital Expenditure
question
Paid $31,000 maintenance on equipment in (4) during its first year of use...
answer
Expense
question
Major overhaul to extend the machinery's useful life by five years...
answer
Capital Expenditure
question
Periodic lubrication after the machinery in placed in service...
answer
Immediate Expense
question
Purchase price....
answer
Capital Expenditure
question
Training of personnel for initial operation of the machinery...
answer
Capital Expenditure
question
Special reinforcement to the machinery platform...
answer
Capital Expenditure
question
Transportation and insurance while machinery is in transit from seller to buyer...
answer
Capital Expenditure
question
Ordinary repairs to keep the machinery in good working order...
answer
Immediate Expense
question
Lubrication of the machinery before it i placed in service
answer
Capital Expenditure
question
Sales tax paid on the purchase price
answer
Capital Expenditure
question
Installation of the conveyor-belt macinery
answer
Capital Expenditure
question
Income tax paid on income earned from the sale of products manufactured by the machinery
answer
Immediate Expense
question
Gain(Loss) Equation
answer
Sales Proceedes - Book Value - Gain (loss) on Sale
question
Amortization
answer
The systematic reduction of a lump-sum amount. Expense that applies to intangible assets in the same way depreciation applies to plant assets and depletion applies to natural resources
question
Impairment
answer
The condition that exists when the carrying amount of a long-lived asset exceeds the amount of the future cash flows from the asset. Whenever long-term assets have been impaired, they have to be written down to fair market values using a two-step process. Under U.S. GAAP, once impaired, the carrying value of a long-lived asset may never again be increased. Under IFRS, if the fair value of impaired assets recovers in the future, the values may be increased
question
Plant Assets
answer
Long-lived assets, such as land, buildings, and equipment, used in the operation of the business. Also called fixed assets or property and equipment
question
Intangible Assets
answer
An asset with no physical form--a special right to current and expected future benefits
question
Natural Resources
answer
Assets such as oil and gas reserves, coal mines, or stands of timber--accounted for as long-term assets when purchased or developed, their cost is transferred to expense through a process called depletion
question
Franchises and Lincenses
answer
Privileges granted by a private business or a government to sell a product or service in accordance with specified conditions
question
Depreciation Cost
answer
The cost of the plant asset minus its estimated residual value
question
Capital Expenditure
answer
Expenditure that increases an asset's capacity or extends its useful life. Capital expenditures are debited to an asset
question
Copyright
answer
Exclusive right to reproduce and sell a book, musical composition, film, other work of art, or computer program. Issued by the federal government, copyrights extend 70 years beyond the author's life
question
Patent
answer
A federal government grant giving the holder the exclusive right for 20 years to produce and sell an invention
question
Depletion
answer
That portion of a natural resource's cost that is used up in a particular period. Depletion expense is computed in the same way as units-of-production depreciation. A depleted asset usually flows into inventory and eventually to cost of goods sold as the resource is sold
question
Goodwill
answer
Excess of the cost of an acquired company over the sum of the market values of its net assets (assets minus liabilities)
question
Total Asset Turnover
answer
A measure of efficiency in usage of total assets. The ratio calculates how many times per year average total assets are covered by net sales. Formula: Net sales/Average total assets. Also known as asset turnover
question
Which of the following costs associated with a delivery van should NOT be? capitalized?
A.
The? van's engine is overhauled and this will extend the useful life by five years.
B.
The van is repainted.
C.
The van is modified so it can be used for multiple purposes in the business.
D.
All of the above items should be capitalized.
answer
The van is repainted
question
The distinction between a capital expenditure and an immediate expense for a plant asset requires judgment.
answer
True
question
To account for the disposal of a plant? asset, the cost of the asset and its related accumulated depreciation are removed from the books.
answer
True
question
On January? 2, 2017, Kaiman Corporation acquired equipment for $600,000. The estimated life of the equipment is 5 years or 100,000 hours. The estimated residual value is $10,000. What is the balance in Accumulated Depreciation on December? 31, 2018, if Kaiman Corporation uses the? straight-line method of? depreciation?
answer
$236,000
question
?Land, a building and equipment are acquired for a lump sum of? $6,000,000. The market values of the? land, building and equipment are? $400,000, $800,000 and? $300,000, respectively. What is the cost assigned to the? equipment? (Do not round any intermediary? calculations, and round your final answer to the nearest? dollar.)
answer
$1,200,000
question
The computation of depletion expense is most closely related to which method for computing? depreciation?
answer
Units-of-Production
question
Major Company purchased equipment to be used in its distribution center. All of the following should be included in the cost of the equipment EXCEPT? for:
answer
insurance costs after the equipment is up and running.
question
A company purchased a machine for $800,000. The accumulated depreciation on the machine is now $140,000. The machine is junked. Which journal entry is prepared to record the? disposal?
answer
debit Loss on Disposal of Machine for $660,000?, debit Accumulated? Depreciation-Machine for $140,000 and credit Machine for $800,000.
question
The cost of land includes the cost of fencing the property and paving the parking lot on the land.
answer
False
question
The cost of land includes the cost of any back property taxes that the purchaser pays.
answer
True- remember!!? you must pay the taxes in order to have the land, equipment etc
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