Final Exam Accounting

during the construction period of a self-constructed asset

Capital expenditures

$15,000 should be included in land improvements account

not 77,00

cost of the asset and the accumulated depreciation to date.

best measures the plant asset's contribution to revenue over its useful life.

that the amount of periodic depreciation be changed in the current year and in future years.

cost of the asset and the accumulated depreciation to date.

in the Other Expenses and Losses section of the income statement

in the Other Expenses and Losses section of the income statement

It is recorded for the fraction of the year to the date of the disposal.

Not 14,000 loss

20

be amortized over its useful life.

6,000 loss

Not the 31ooooo one

$35,000

sales by average

all of the choices are correct

No gain or loss on disposal

An increase in net sales will cause an increase in asset turnover.

land improvement

147,000

The entry for the retired asset does not include a debit to Cash, but the entry for the sold asset does.

"Even though the assets are fully depreciated, you need to continue to report both the assets and their accumulated depreciation on the balance sheet to indicate that the assets are still in use. However, you must be careful not to take any additional depreciation on the assets, because in no situation can the accumulated depreciation on an asset exceed its cost."

Amortization expense will be understated, net income will be overstated, and assets will be overstated.

$8,000

$2,600 Intangible assets are amortized using the straight-line method. Original amortization was $2,200 ($26,400 ÷ 12) per year, current half-year amortization before the litigation was $1,100, and 4.5 years ($9,900) of amortization has accumulated up to the date of litigation. Book value is $16,500 ($26,400 - 9,900), and the legal fees are added to this amount for a new book value of $22,500. Dividing the new book value by the 7.5 remaining years of useful life results in $1,500 (= 3,000 ÷ 2) amortization for the second half of 2017. Adding this amount to the $1,100 of amortization from earlier in the year results in amortization expense of $2,600 for 2017.

full-disclosure principle

$30,600 Ignoring the salvage value for the double- declining-balance method, the depreciation percentage per year is calculated by doubling the straight-line rate (100% ÷ 5 years = 20%; 20% × 2 = 40%. For year 1, depreciation expense is $34,000 ($85,000 × 40%). Subtracting the expense from the original cost yields a book value of $51,000 at the beginning of year 2. $51,000 × 40% = $20,400 (year 2 depreciation); subtracting the expense from the year 2 beginning book value ($51,000 - 20,400) results in the book value being $30,600 on December 31st, 2018.

The first was disposed of at the beginning of the fiscal year, whereas the second was disposed of later in the fiscal year. A partial year of depreciation must be subtracted from the book value of an asset when it is disposed of if the asset is sold sometime other than immediately after the start of a new fiscal year. Because the first piece of equipment did not have a partial year of depreciation subtracted from the book value, the equipment was likely sold at the beginning of the fiscal year. However, the second piece of equipment did have a partial year of depreciation subtracted from the book value, so it had to have been disposed of later in the year.

double declining-balance