ACC 1210 Chapter 8 smartbook

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.

$2,000

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:

$235,000

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: Multiple choice question. $215,000

$250,000

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.

$5,000

Which of the following situations will result in recognizing a gain on sale of a plant asset?

A fully depreciated asset is sold for $1,000.

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

Balance sheet

Franco Co. reported net sales of $10,000 in year 2 and $8,000 in year 1. Franco reported total assets of $18,000 in year 2 and $22,000 in year 1. Total asset turnover for year 2 would equal __________ (answer should be a decimal number).

Blank 1: 0.5

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 $ __________ per year.

Blank 1: 2000

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 $

Blank 1: 495000

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

Blank 1: Plant or Fixed

Total asset turnover is computed by dividing net sales by __________ total assets.

Blank 1: average

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

Blank 1: contra

Trio Co. reported that maintenance and repair costs are expensed as incurred. If Trio's current year machinery and equipment repair costs are $8,200, which accounts would be impacted to complete the journal entry? (Check all that apply.)

Debit Repairs expense. Credit Cash.

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? (Check all that apply.)

Debit to Cash for $500. Credit to Machinery for $7,000. Debit to Accumulated Depreciation - Machinery for $6,500.

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? (Check all that apply.)

Debit to Equipment. Credit to Accounts Payable.

Zen Co. sells a copier machine for $2,000. The copier cost Zen $6,000 and at the time of sale, accumulated depreciation was $2,500. Zen will record this sale with which of the following entries?

Debit to Loss on Disposal of Machinery for $1,500.

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

Depletion

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

Depreciation

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

Gain

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? (Check all that apply.)

Gain on Sale of Equipment Equipment

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

Intangible assets

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?

Loss on Disposal of Equipment for $1,500

_______ 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.

Ordinary repairs

Ordinary repairs, such as repairs and maintenance to a vehicle, would be recorded with a debit to which of the following accounts?

Repairs expense

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

Replacing an engine

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

Salvage

The cost at which a company records purchases of machinery and equipment should include which of the following? (Check all that apply.)

Shipping fees Taxes Purchase price Installation

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

amortization

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 ________ depreciation method.

declining-balance

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 __________ method.

declining-balance

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

impairment

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

over the asset's life using amortization expense

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

useful

A delivery van that cost $45,000 with accumulated depreciation of $15,000 is sold for $20,000. How much gain or loss will be recognized on this sale?

$10,000 loss

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?

$13,000

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?

$6,000

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?

Accumulated Depreciation - Equipment for $3,500

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? (Check all that apply.)

Assembling Testing Shipping charges

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

Blank 1: useful

Which of the following asset(s) are not considered intangible assets? (Check all that apply.)

Copy machine Mineral deposit

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

Depreciation Expense - Equipment

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 _______ account.

Equipment

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 ________ account.

Equipment

___________ are expenditures that extend the asset's useful life beyond its original estimate.

Extraordinary repairs

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

Income statement

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 _________ account.

Machinery

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

Natural

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

Natural resources

Determine which of the following expenses are considered revenue expenditures related to a company vehicle. (Check all that apply.)

Oil change Car wash Dent repair

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?

There is no gain or loss.

Consistent with the ________ 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.

cost

Sioux Co. replaced the roof on its existing building, therefore increasing the building's life by 10 years. The cost of the roof is considered a(n):

extraordinary repair

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:

$196,500

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:

$350,000.

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

Betterments

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.

Blank 1: 5000

(Capital/Revenue) __________ expenditures are additional costs of plant assets that provide benefits extending beyond the current period, such as a plant expansion, or machine overhaul.

Blank 1: Capital

Which of the following items are plant assets? (Check all that apply.)

Building being used for operations Equipment being used in operations

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? (Check all that apply.)

Credit to Cash Debit to Machinery

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

False

Determine which of the following expenses related to a building would be classified as a capital expenditure. (Check all that apply.)

Room addition New air conditioning system

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

betterment.

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.

$2,812.50

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

Blank 1: Revenue

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

depletion