Chapter 8 Accounting for Long-Term Assets

Which of the following items are plant assets?

True or false: The cost of plant assets should include all of the normal and reasonable expenditures necessary to get the asset in place and ready for its intended use, including repairs to damages incurred after installation

Alin Co. purchases a building for $300,000 and pays an additional $30,000 for closing costs (brokerage, title, attorney fees). Alin also pays $20,000 in renovations, including painting, carpet, lighting, etc. Alin should record the cost of the building at:

Wen Co. purchased a building for $200,000. Wen paid $20,000 in lawyer and title fees. Wen also paid an additional $15,000 to modify the building in order to accommodate his business needs. Wen should record the cost of the building at:

Land BLANK are assets that increase the benefits of land, have a limited useful life, and are depreciated—such as walkways and fences.

BLANK assets are assets used in a company's operations that have a useful life of more than one accounting period.

Consistent with the BLANK principle, plant assets should be recorded at cost, which includes all the normal and reasonable expenditures necessary to get the asset in place and ready for its intended use.

The cost at which a company records purchases of machinery and equipment should include which of the following?

Geo Co. purchased a building for $400,000. In addition, Geo paid $35,000 closing fees (including title and lawyer fees). Geo also paid $60,000 to modify the building, changing the layout specifically for Geo's needs. Geo should record the building at $

Assets that increase the benefits of land, have a limited useful life, and are depreciated—such as parking lots and street lights—are called:

Plant assets should be recorded at cost, including all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use. This would include which of the following costs?

Alin Co. purchases a building for $300,000 and pays an additional $30,000 for closing costs (brokerage, title, attorney fees). Alin also pays $20,000 in renovations, including painting, carpet, lighting, etc. Alin should record the cost of the building at:

PT Co. purchased land and an existing building for $200,000. In addition, PT paid closing costs of $15,000. PT removed the building and regraded the land for a total cost of $35,000. PT should record the cost of the land for:

The purchase of multiple plant assets for one purchase price is called a BLANK purchase.

BLANK is the process of allocating the cost of a plant asset to expense in the accounting periods benefiting from its use.

Ion Co. purchased land for $190,000. Ion also paid $5,000 in brokerage fees, $1,000 in legal fees, and $500 in title costs. Ion should record the cost of this land to be:

(Plant/Current) assets purchased as a group in a single transaction for a lump-sum price (also called a lump-sum, group, bulk, or basket purchase) are allocated the purchase price based on their relative market values.

The factors necessary to compute depreciation include (cost/selling price/market value) salvage value and useful life.

Wen Co. purchased a building for $200,000. Wen paid $20,000 in lawyer and title fees. Wen also paid an additional $15,000 to modify the building in order to accommodate his business needs. Wen should record the cost of the building at:

BLANK value, also called residual value or scrap value, is an estimate of the asset's value at the end of its benefit period.

Which of the following factors determine depreciation? Current market value of asset Cost of asset Salvage value Book value Appraisal of asset Useful life

The BLANK life (also called service life) is the length of time the asset is productively used in a company's operations.

Straight-line depreciation is calculated by taking cost minus (salvage/market) value divided by useful life.

On January 3, ATA Company purchases a copy machine for $11,500. The machine is expected to last five years and have a salvage value of $1,500. Compute depreciation expense for the first year, assuming the company uses the straight-line method.

Depreciation Expense is reported on which of the following financial statements?

The BLANk life of a plant asset is the length of time it is productively used in a company's operations

Straight-line depreciation can be calculated by taking:

On January 2, Dice Co. purchases a mixing machine for $25,500. The machine is expected to last four years and have a salvage value of $5,500. Assuming the company uses the straight-line method, depreciation expense should be $ per year.

Accumulated depreciation is recorded on which of the following financial statements?

Which of the following items related to depreciating equipment would be found on a company's income statement?

Arc Co. purchased a piece of equipment for $25,000. At the end of the year, the book value of the equipment is $12,000. The salvage value is 0. How much is accumulated depreciation at the end of the period?

On January 1, Enco Co. purchases a milling machine for $15,000. The machine is expected to last seven years and have a salvage value of $1,000. Assuming the company uses the straight-line method, depreciation expense should be $BLANK per year

Accumulated depreciation is a BLANK asset account (one that is linked with the plant asset account, but has an opposite normal balance) and is reported on the balance sheet.

Depreciation Expense is reported on which of the following financial statements?

Ring Co. owns a delivery van that was purchased two years ago for $25,000. Ring has depreciated the van for two years at a straight-line amount of $4,000 per year. The book value of this van at the end of the second year would be $

Book value can be calculated by taking an asset's acquisition costs less its BLANK BLANK

At the beginning of the year, Jobs Co. owned one piece of office equipment, a copier. The copier was purchased two years ago for $12,000. At the beginning of the year, the balance in accumulated depreciation was $4,000. Jobs uses straight-line depreciation of $2,000 per year with a zero salvage value. How much is accumulated depreciation at the end of the year?

The asset's acquisition costs less its accumulated depreciation is called:

Grand Co. owns one copier that was purchased for $10,000 three years ago. The depreciation expense taken on the copier each year has been $2,700; $1,800; and $2,200, based on the number of copies that have been made on the copier. Based on this information, the company uses the BLANK depreciation method.

Digg Co. installs a manufacturing machine in its factory at the beginning of the year at a cost of $36,000. The machine's useful life is estimated at 10 years, or 300,000 units of product, with a $6,000 salvage value. During its first year, the machine produces 14,000 units of product. Determine the machine's first year depreciation expense under the units-of-production method.

The depreciation method that determines the depreciation charge for the period by multiplying a depreciation rate (often twice the straight-line rate) by the asset's beginning-period book value is known as the BLANK method.

Bina Co. purchased a vehicle on January 1st for $15,000 and estimates it will use the vehicle for eight years with a $3,000 salvage value. Using the double declining-balance depreciation method, compute the vehicle's second year depreciation expense.

On January 24, Bora Co. purchased a delivery van for $22,000. Bora expects to drive the van for approximately 5 years or 100,000 miles, before disposing of it for an estimated salvage value of $2,000. During the first year, Bora drives the van for 18,000 miles. How much would depreciation expense be if Bora uses the units-of-production depreciation method?

Privo Co. purchases a machine that cost $15,000. Privo estimates a 5-year life with no salvage value. The first three years of depreciation expense are $6,000; $3,600; and $2,160, respectively. Based on this information, Privo is using the BLANK depreciation method.

Nimo Co. purchased a machine for $12,000 and estimates it will use the machine for five-years with a $2,000 salvage value. Using the double declining-balance depreciation method, compute the machine's first year depreciation expense.

Which depreciation method will compute the most depreciation expense over the life of the asset?

On June 1, Harding Co. purchased a machine for $14,000 and estimates it will use the machine for five-years with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine's first year (partial) depreciation expense for June 1st through December 31st.

True or false: The book value of an asset when using straight-line depreciation is always greater than the book value from using double-declining-balance, except at the beginning and end of the asset's useful life, when it is the same.

On October 30, Cleo Co. purchased a machine for $26,000 and estimates it will use the machine for four-years with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine's first year partial depreciation expense for October 30 through December 31.

Rino Co. pays $35,000 for equipment. The machine's useful life is estimated at 10 years, or 50,000 units of product with a $5,000 salvage value. During the first year, the machine produced 12,000 units of product. How much depreciation expense will Rino record this first year based on the units-of-production depreciation method?

Tops Co. purchases equipment for $12,000 and has been using straight-line depreciation, estimating a 5-year life and $500 salvage value. At the beginning of the third year, Tops decides to use the equipment for a total of 6-years with no salvage value. Compute the revised depreciation for the third year.

Juno Co. purchased a machine for $10,000 and estimates it will use the machine for four years with a $2,000 salvage value. Using the double declining-balance depreciation method, compute the machine's first year depreciation expense.

Accumulated depreciation is reported on which of the following financial statements?

(Revenue/Capital) expenditures are additional costs of plant assets that do not materially increase the asset's life or productive capabilities.

When a company revises an estimate used to record depreciation expense, the company should revise depreciation by using the formula (BLANK - revised salvage value)/revised remaining useful life.

BLANK are expenditures that keep an asset in normal, good operating condition. They are necessary if an asset is to perform to expectations over its useful life.

Depreciation expense is reported as a decrease in which of the following financial statements?

BLANK are expenditures that make a plant asset more efficient or productive, but do not always increase an asset's useful life.

Determine which of the following expenses are considered revenue expenditures related to a company vehicle. Engine overhaul Installation of special equipment Car wash Oil change Dent repair

Which of the following expenses would not be considered an ordinary repair?

Niren Co. made modifications to a manufacturing machine that increased its productivity by 40%. Niren would classify this expense as a(n):

On June 1, Harding Co. purchased a machine for $14,000 and estimates it will use the machine for five-years with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine's first year (partial) depreciation expense for June 1st through December 31st.

Quick Catering Co. paid for a refrigeration system to be added to their delivery van to keep the food cooled during deliveries. To record this expense, Quick would debit the BLANK account.

Diamond Co. paid cash to overhaul a forklift, which extended the life of the forklift for an additional four years. The entry to record this purchase would include a debit to the BLANK account.

BLANK are expenditures that keep an asset in normal, good operating condition. They are necessary if an asset is to perform to expectations over its useful life.

Zion Co. paid cash for an upgrade to an existing machine that would reduce the amount of waste produced by the machine (and therefore, increasing efficiency). The journal entry to record this upgrade would include which of the following entries?

A company owns an asset that is fully depreciated. The asset is no longer being used in operations and has no market value. The company has decided to BLANK the asset by recording an entry to remove it from the balance sheet.

Rojo's Roses Co. received an invoice for replacement of the engine on its main delivery van. The replacement will extend the life of the van an additional three years. The entry to record receipt of the invoice would include which of the following entries?

On December 31, Briar Co. disposed of a piece of equipment that cost $6,000 with accumulated depreciation of $4,500. The entry to record this disposal would include a debit to which account and for how much?

A plant asset is (depreciated/discarded/obsolete) when it is no longer useful to the company, and it has no market value.

Forward Co. discarded a machine that cost $5,000 and was fully depreciated. The entry to record this transaction would include a credit to the BLANK account.

A company sells a machine that cost $7,000 for $500 cash. The machine had $6,500 accumulated depreciation. The entry to record this transaction will include which of the following entries?

When an asset is sold for an amount that is above the asset's current book value, the company should record?

BLANK are assets that are physically consumed when used, such as mineral deposits and oil and gas fields.

An oil company recognizes the cost of discovering and operating oil wells by recording BLANK expense for each unit of oil used.

Martinez Co. sells a machine that cost $10,000 with accumulated depreciation of $8,000 for $2,000 cash. The entry to record this transaction will recognize a gain or loss of how much?

Sangmoon Co. sells equipment for $1,000 cash. The equipment cost Sangmoon $6,500 and is fully depreciated at the time of sale and has no salvage value. Sangmoon will record the sale with a credit to which account and for how much?

Brice Co. purchases land in order to drill oil. This oil field would be classified as a(n) BLANK on the balance sheet.

BLANK is the process of allocating the cost of a natural resource to the period when it is consumed.

Forward Co. discarded a machine that cost $5,000 and was fully depreciated. The entry to record this transaction would include a credit to the BLANK account.

ATZ Co. sells equipment that cost $9,000 with current accumulated depreciation of $8,000 for $2,000 cash. To record this transaction, ATZ will credit which accounts?

Daley Co. owns a mineral deposit with an estimated 600,000 tons of available ore. It was purchased for $300,000 and has no salvage value. During the current period, Daley mined and sold 40,000 tons of ore. Depletion expense for the period will be how much?

To calculate depletion expense, first determine the depletion per unit. Depletion per unit can be calculated by taking (cost BLANK)/total units of capacity.

On December 31, Briar Co. disposed of a piece of equipment that cost $6,000 with accumulated depreciation of $4,500. The entry to record this disposal would include a debit to which account and for how much?

The process of allocating the cost of a natural resource to a period when it is consumed requires a debit entry to the BLANK BLANK account.

BLANK are nonphysical assets (used in operations) that confer on their owners long-term rights, or competitive advantages.

Ironworks Co. sells a machine that cost $5,000 with a current book value of $1,500 for $2,000 cash. Ironworks will record a debit to which account and for how much?

Seven Co. owns a coal mine with an estimated 1,000,000 tons of available coal. It was purchased for $300,000 and has $50,000 salvage value. During the current period, Seven mined and sold 200,000 tons of coal. Depletion expense for the period will be how much?

To calculate depletion expense in a period, a company should multiply the depletion per unit by:

Ella Co. owns a mineral deposit and recognizes $15,000 of depletion expense during the period. This entry will be recorded with a credit to:

Which of the following asset(s) are not considered intangible assets? Trademark Copy machine Copyright Goodwill Mineral deposit

Copyrights, trademarks, and other intangible assets are expensed over their useful lives through the process of:

Which of the following assets are amortized?

BLANK is the amount by which a company's value exceeds the value of its individual assets and liabilities. It is recorded as an intangible asset, but is not amortized.

Intangible assets, such as goodwill, continue indefinitely into the future and are not amortized. The values of these assets are tested annually for BLANK

A BLANK is an exclusive right granted to its owner to manufacture and sell an item or use a process for 20 years.

A patent was purchased for $20,000 and expected to be used for the 20-year life with no salvage value. The entry to expense the patent during the second year of life will include which of the following entries?

Which of the following intangible assets is not amortized using straight-line amortization?

Bilos Co. purchased a patent on a newly developed technology. They will recognize the cost of this patent:

A company acquires a patent for $20,000 to manufacture and sell an item. The company intends to hold the patent for 5 years. Amortization for the first year will be recorded with a debit to Amortization Expense for $

A patent was purchased for $15,000 and expected to be used for the 10-year life with no salvage value. The entry to expense the patent during the second year of life will include which of the following entries?

The exclusive right to publish or sell a musical, literary, or artistic work during the life of the creator plus 70 years is called a BLANK

Wyatt Co. purchased a popular symbol that doubled its sales in the first year. The cost of this symbol is an asset called a:

If an intangible asset has a limited life, its cost is systematically allocated to expense over its useful life through the process of:

The amount by which a company's value exceeds the value of its individual assets and liabilities is called

A symbol, name, phrase or jingle identified with a company, product or service is called a

BLANK is measured as the excess of the cost of an acquired entity over the value of the acquired net assets.

Advantages of leasing versus buying an asset include all of the following:

The total asset turnover ratio is computed by taking net sales divided by: