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Exam 8: Reporting and Analyzing Long-Term Assets

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Question 51

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A company purchased and installed a machine on January 1,2006 at a total cost of $72,000.Straight-line depreciation was calculated based on the assumption of a five-year life and no salvage value.The machine was disposed of on July 1,2010. 1.Prepare the general journal entry to update depreciation to July 1,2010. 2.Prepare the general journal entry to record the disposal of the machine under each of these three independent situations: a. The machine was sold for $22,000 cash b. The machine was sold for $15,000 cash c. The machine was totally destroyed in a fire and the insurance company settled the claim for $18,000 cash

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Question 52

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Amortization is the process of allocating the cost of natural resources to periods when they are consumed.

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Question 53

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Salvage value is an estimate of an asset's value at the end of its benefit period.

A company had net sales of $541,500 in 2010 and $475,300 in 2011.Its average assets were $410,000 for 2010 and $400,000 for 2011.(1)Calculate the total asset turnover for each year.(2)Interpret and comment on the company's efficiency in the use of its assets.

On January 2,2006,a company purchased a delivery truck for $45,000 cash.The truck had an estimated useful life of seven years and an estimated salvage value of $3,000.The straight-line method of depreciation was used.Prepare the journal entries to record the updating of depreciation and the disposition of the truck on September 1,2010,under each of the following assumptions: a. The truck and $45,000 cash were given in exchange for a new delivery truck that had a cash price of $60,000 b. The truck and $40,000 cash were exchanged for a new delivery truck that had a cash price of $60,000

A new machine is expected to produce 600,000 units of product during its 8-year useful life.The machine cost $1,800,000 cash and it is estimated to have a $60,000 salvage value.What is the first year's depreciation on the machine as calculated by the straight-line method?

Acme Company has a total asset turnover of 1.25 for the current period.What are net sales given that average total assets are $40,000?

Land improvements are:

What is depreciation of plant assets? What are the factors to consider in computing depreciation?

A depreciation method that produces larger depreciation expense during the early years of an asset's life and smaller expense in the later years is a(n) :

On January 1,a company purchased a machine for $75,000 that had a 6-year useful life and a salvage value of $6,000.After three years of straight-line depreciation,on January 1,2010 the company paid $7,500 cash to improve the efficiency of the machine.The effect of the expenditure was to increase the productivity of the machine without increasing its remaining useful life or changing its salvage value.Straight-line depreciation is used throughout the machine's life. 1.Prepare the journal entry to record the $7,500 expenditure. 2.What amount of depreciation expense should be recorded for 2010?

Dell had net sales of $35,404 million.Its average total assets for the period were $14,502 million.Dell's total asset turnover is equal to:

It is not necessary to report both the cost and the accumulated depreciation of plant assets on the financial statements of the company.

A company's annual accounting period ends on September 30.During the current year a depreciable asset which cost $16,000 was purchased on January 1.The asset has a $2,000 estimated salvage value.The company uses straight-line depreciation and expects the asset to have a 4-year life.What is the total depreciation expense for the current year?

A method that allocates an equal portion of the total depreciable cost for a plant asset to each unit produced is called:

Depreciation measures the actual decline in market value of an asset.

_____________________ are additional costs of plant assets that provide benefits extending beyond the current period; they increase or improve the type or amount of service an asset provides.

A company purchased a tract of land for its natural resources at a cost of $1,500,000.It expects to mine 2,000,000 tons of ore from this land.The salvage value of the land is expected to be $250,000.The depletion expense per ton of ore is:

When originally purchased,a vehicle had an estimated useful life of 8 years.The vehicle cost $23,000 and its estimated salvage value is $1,500.After 4 years of straight-line depreciation,the asset's total estimated useful life was revised from 8 years to 6 years and there was no change in the estimated salvage value.The depreciation expense in year 5 equals:

A company purchased equipment valued at $200,000 on January 1.The equipment has an estimated useful life of six years or five million units.The equipment is estimated to have a salvage value of $13,400.Assuming the units of production method of depreciation,what is the annual depreciation for the second year if 1.5 million units were produced?