ACC- Ch 10 LS

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

natural resource

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

over the asset's life using amortization expense

Total asset turnover is computed as net __________/average total assets.

sales

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

salvage

Franco Co. reported net sales of $10,000 in 2010 and $8,000 in 2009. Franco reported totals assets of $18,000 in 2010 and $22,000 in 2009. Total asset turnover for 2010 would equal _________ (answer should be a decimal number).

0.5

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.

$1,000

Teshin Co. purchases a piece of land with several land improvements for $180,000. The land appraises at $120,000 and the land improvements appraise at $80,000. The land should be recorded at which cost?

$108,000

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 companu uses the straight-line method, depreciation expense should be $_______ per year.

$2,000 (15,000-1,000)/7 = 2,000

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?

$20,000

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:

$250,000

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.

$4,800 12,000 x [100%/5)x2]

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 10,000 x (.25 x 2)

Cen Co. purchases land and a building for $130,000. The land is appraised at $100,000 and the building at $150,000. Allocating the cost based on market values, the land should be recorded at what amount?

$52,000

Rino Co. pays $35,000 for equipment. The machine's useful life is estimated at 10 years, or 50,000 units of production 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?

$7,200 (35,000-5,000)/50,000 x 12,000

Which of the following assets are amortized?

- Copyright - Patent

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?

- Credit Cash - Debit Repairs expense

Rojo's Rose 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?

- Credit to Accounts Payable - Debit to Equipment

A patent was purchased for $20,000 and expected to be used for the 20-year life with salvage value. The entry to expense the patent during the second year of life will include which of the following entries?

- Credit to Accumulated Amortization $1,000. - Debit to Amortization Expense $1,000.

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?

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

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

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

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?

- Debit to Machinery - Credit to Cash

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?

- Gain on Sale of Equipment - Equipment

Which of the following asset(s) are not considered intangible assets?

- Mineral deposit - Copy machine

The cost of a plant asset includes the following:

- Purchase price - Cost to prepare it for use

Which of the following factors determine depreciation?

- Salvage value - Useful life - Cost of asset

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?

- Taxes - Insurance while in transit - Shipping charges

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

- Taxes - Purchase price - Shipping fees - Installation

Keva Co. trades in a vehicle with an original cost of $20,000 and accumulated depreciation of $18,000. The list price of the new vehicle is $25,000. In addition to the old vehicle, Keva also provides $24,000 cash. Assuming this transaction has commercial substance, the entry to record this transaction would include debits to which of the following accounts?

- Vehicles for $25,000 - Loss on Exchange of Vehicles for $1,000 - Accumulated Depreciation - Vehicles for $18,000

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.

GaHa Co. is trading in an old machine for a new machine. The list price of the new machine is $18,000. The old machine has a cost of $15,000 and accumulated depreciation of $12,000. In addition to the old machine, GaHa will pay $14,000 cash towards the purchase of the new machine. The machines are similar in nature and, therefore, will not provide any commercial substance. GaHa will record the new asset with a debit to Machinery in the amount of $______.

17,000

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

17,000

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 $________.

4,000

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

495,000 400,000 + 35,000 + 60,000

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

All methods will produce equal depreciation expense over the life of the asset.

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

Minus salvage value

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

Balance sheet

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

Betterments

(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.

Capital

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

Depreciation

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

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

Extraordinary repairs

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

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?

Gain on Sale of Equipment for $1,000.

_______ 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.

Goodwill

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

T. Chung Co. sold a computer for $500 cash. The computer cost $3,000 and had accumulated depreciation of $2,200 at the time of the sale. Chung will record the sale with an entry to the (Gain/Loss) on Disposal of Equipment account in the amount of _______.

Loss; $300

(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.

Plant

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

Plant

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

Replacing an engine

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

Revenue

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

Salvage

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

Salvage

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.

True

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

accumulated depreciation

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

amortization

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

book value

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.

contra

Accumulated depletion is considered to be a _________ and is recorded on the _________.

contra-asset; balance sheet

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

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

declining-balance

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

depletion

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

depletion expense

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 _______ the asset by recording an entry to remove it from the balance sheet.

discard

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

discarded

Grand Co. trades in an old machine for a new machine. The new machine has a list price of $10,000. The old machine has a cost of $12,000, and accumulated depreciation of $9,000. In addition, Grand will pay $6,000 towards the purchase. Because the new machine is much more technologically advanced, the exchange has commercial substance. The trade will include a (gain/loss) of $___________.

gain; 1,000

Land _________ are assets that increase the benefits of land, have a limited useful life, and are depreciated-such as sidewalks and fences.

improvements

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 ________ depreciation method.

units-of-production

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

useful