ACC Chapter 7
Land, a building and equipment are acquired for a lump sum of $900,000. The market values of the land, building and equipment are $400,000, $600,000 and $200,000, respectively. What is the cost assigned to the equipment? (Do not round any intermediary calculations, and round your final answer to the nearest dollar.)
$150,000 900,000/400,000+600,000+200,000 x 200,000
On January 4, 2023, Mary's Cafe acquired equipment for $700,000. The estimated life of the equipment is 8 years or 60,000 hours. The estimated residual value is $60,000. What is the balance in the Accumulated Depreciation account at December 31, 2024 if the straight−line method is used?
$160,000 700,000 - 60,000 / 8 x 2
Which of the following costs associated with a delivery van should NOT be capitalized?
The van is repainted after 4 years of use.
On January 2, 2023, Saminski, Inc., acquired equipment for $400,000. The estimated life of the equipment is 5 years. The estimated residual value is $40,000. What is the Accumulated Depreciation of the equipment on December 31, 2024, if Saminski uses the double−declining−balance method of depreciation? (Round intermediary calculations to two decimal places and your final answer to the nearest dollar.)
$256,000 400,000 x 0.4 = 160,000 400,000-160,000=240000 240,000 x 0.4 = 96,000 160,000 + 96,000
Gengler Company acquired three pieces of equipment for $1,400,000. Equipment #1 is appraised at $800,000, equipment #2 is appraised at $510,000 and equipment #3 is appraised for $790,000. The cost of equipment #1 is: (Do not round any intermediary calculations, and round your final answer to the nearest dollar.)
$533,333 800,000+510,000+790,000 = 2,100,000 800,000/2,100,000 x 1,400,000
Lorenzo Corporation purchased equipment on January 1, 2023 for $900,000. The equipment had an estimated useful life of 5 years and an estimated salvage value of $70,000. After using the equipment for 2 years, the company determined that the equipment could be used for an additional 6 years and have a salvage value of $4,000. Assuming Lorenzo Corporation uses straight−line depreciation, compute depreciation expense for the year ending December 31, 2025. (Round your final answer to the nearest dollar.)
$94,000 900,000-70,000/5= 166,000 166,000 x 2 = 332,000 900,000-332,000/6=94,000
Equipment costing $40,000 with a book value of $18,000 is sold for $27,000. Which journal entry is used to record the sale?
debit Cash for $27,000, debit Accumulated Depreciation − Equipment for $22,000, credit Equipment for $40,000 and credit Gain on Sale of Equipment for $9,000
The journal entry to record depreciation expense for equipment is:
debit Depreciation Expense − Equipment, credit Accumulated Depreciation − Equipment.
A company purchased a machine for $500,000. The accumulated depreciation on the machine is now $140,000. The machine is junked. Which journal entry is prepared to record the disposal?
debit Loss on Disposal of Machine for $360,000, debit Accumulated Depreciation − Machine for $140,000 and credit Machine for $500,000
When a plant asset is fully depreciated:
the book value is equal to the salvage value.
On January 2, 2023, Konrad Corporation acquired equipment for $500,000. The estimated life of the equipment is 5 years or 18,000 hours. The estimated residual value is $14,000. If Konrad Corporation uses the units of production method of depreciation, what will be the debit to Depreciation Expense for the year ended December 31, 2024, assuming that during this period, the asset was used 6,000 hours?
$162,000 500,000 - 14,000 / 18 = 27 27 x 6,000 = 162,000
On January 2, 2023, Konan Corporation acquired equipment for $600,000. The estimated life of the equipment is 5 years or 40,000 hours. The estimated residual value is $30,000. What is the balance in Accumulated Depreciation on December 31, 2024, if Konan Corporation uses the double−declining−balance method of depreciation? (Round any intermediary calculations to two decimal places and your final answer to the nearest dollar.)
$384,000 600,000 x 0.4 = 240,000 600,000-240,000 x 0.4 = 144,000 240,000 + 144,000
On January 2, 2023, Kornis Corporation acquired equipment for $1,000,000. The estimated life of the equipment is 5 years or 80,000 hours. The estimated residual value is $10,000. What is the balance in Accumulated Depreciation on December 31, 2023, if Kornis Corporation uses the double−declining−balance method of depreciation?
$400,000 1,000,000 x 0.4
Equipment purchased for $120,000 on January 1, 2024, was sold on July 1, 2027. The company uses the straight−line method of computing depreciation and recognizes $12,000 of depreciation expense annually. When recording the sale, the company should record a debit to Accumulated Depreciation−Equipment for:
$42,000 12,000 x 3 = 36,000 12,000 x 6/12 = 6,000 36,000 + 6,000
On January 4, 2023, Margaret's Cafe acquired equipment for $147,500. The estimated life of the equipment is 4 years or 42,500 hours. The estimated residual value is $20,000. What is the depreciation for 2023, if Margaret's Cafe uses the asset 14,300 hours and uses the units−of−production method of depreciation?
$42,900 147,500-20,000/42,500 x 14,300
On January 2, 2023, Kellogg Corporation acquired equipment for $800,000. The estimated life of the equipment is 5 years or 90,000 hours. The estimated residual value is $30,000. What is the book value of the asset on December 31, 2024, if Kellogg Corporation uses the straight−line method of depreciation? (Round any intermediary calculations to two decimal places and your final answer to the nearest dollar.)
$492,000 800,000-30,000/5= 154000 154,000 x 2 = 308,000 800,000-308,000
Calculate Company Y's total asset turnover based on the following information for the current year: (Round your final answer to two decimal places.) Net income $700,000 Assets at the beginning of the year $150,000 Assets at the end of the year $120,000 Net sales $800,000
5.93 150,000 + 120,000 / 2 = 135,000 800,000 / 135,000 = 5.93
Kolonas, Inc., sold equipment for $5,000 cash. The equipment cost $74,200 and had accumulated depreciation through the date of sale of $72,000. At the date of sale, the journal entry to record the sale will have:
a Gain on Sale of Equipment for $2,800. 74,200-72,000 = 2,200 5,000-2,200
As a plant asset is used in operations:
accumulated depreciation increases and the book value of the asset decreases.
If a company capitalizes a cost that should have been expensed:
expenses will be understated and net income will be overstated in the year of the error.
Return on assets measures:
how much the entity earned for each dollar of assets invested by both stockholders and creditors and net profit margin ratio times total asset turnover.
