Chapter 8 Accounting
Juarez Mining purchased a vein of coal ore for $3,800,000. It is estimated that 30,000,000 tons of ore are available to be extracted. The estimated depletion rate for each ton of ore (rounded to the nearest cent) is:
$0.13.
An asset has a cost of $70,000 with a residual value of $14,000. It has a life of 5 years and was purchased on January 1. Its fourth full year of depreciation expense under double-declining-balance will be: (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)
$1,120.
Leo's Lawncare purchased equipment on January 1. The cost was $15,000, and the equipment had a residual value of $5,000. The equipment was given a useful life of 10 years. After the end of two years, it was determined that the equipment would be obsolete in 5 more years and the residual value would still be $5,000. What will be the depreciation under the straight-line method to the nearest dollar be for the third year?
$1,600
A company purchased a van at a cost of $42,000 and expects its salvage value to be $6,000 after 100,000 miles of service. Using the units-of-production method, what is the first year's depreciation if the van is driven 30,000 miles? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)
$10,800
New equipment was purchased on January 1 for $144,000. It has a salvage value of $28,000 and a useful life of 10 years. To the nearest dollar, how much will the depreciation expense for the equipment be for the first year using the straight-line method?
$11,600
Ironworks Industries purchased a piece of equipment for $80,000 with an estimated salvage value of $15,000 on January 1. Its estimated life is 5 years. To the nearest dollar, what is the equipment's depreciation using double-declining-balance for year 2? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)
$19,200
After 4 years, a machine had an accumulated depreciation of $40,000. Originally, the machine had an anticipated life of 8 years and a salvage value of $6,000. If the current book value after 4 years is $45,000 and the machine has only 2 years of useable life left, how much will be depreciated in Year 5 and in Year 6 using the straight-line method of depreciation, and assuming the salvage value is still $6,000? (Round your final answer to the nearest dollar.)
$19,500 each year
Lionworks Corporation made a basket purchase of three items. Item X was appraised at $30,000; item Y was appraised at $55,000; and item Z was appraised at $65,000. The purchase price was $125,000. The amount at which item X should be recorded (rounded to the nearest dollar) is: (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)
$25,000.
Spring Creek Mines purchased a vein of mineral ore for $3,260,000. It is estimated that 20,000,000 tons of ore are available to be extracted. The estimated depletion expense for this year's extraction of 1,770,000 tons of ore is: (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)
$283,200.
Custom Closets purchased office fixtures on January 1. The cost was $16,000, and the fixtures had a residual value of $6,000. The fixtures were given a useful life of 8 years. After the end of three years, it was determined that the fixtures would be obsolete in 2 more years and their residual value would still be $6,000. What will be the depreciation under the straight-line method to the nearest dollar be for the fourth year? (Round your final answer to the nearest dollar.)
$3,125
A company purchased furniture on January 1. Its cost was $15,600, and it had a residual value of $3,600. Its useful life is determined to be 8 years. Using double-declining balance depreciation, the depreciation for year 1 to the nearest dollar will be:
$3,900.
Capitol Construction Company made a basket purchase of three items. Item X was appraised at $55,000; item Y was appraised at $65,000 and item Z was appraised at $40,000. The purchase price was $125,000. The amount at which item Z should be recorded (rounded to the nearest dollar) is: (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)
$31,250.
Cesario Corporation purchases a machine for $125,000. It has an estimated salvage value of $10,000 and is expected to produce 50,000 units in its lifetime. During the first year of operation, it produced 15,000 units. To the nearest dollar, the depreciation for the first year under the units of production method will be:
$34,500.
Bob's Bakery made a basket purchase involving four assets. Their market values were A: $50,000; B: $46,000 C: $48,000; and D: $56,000. The price Bob's paid for the four assets was $150,000. To the nearest dollar, what final price will be recorded for asset D? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)
$42,000
Wolfe Company purchased a truck for $62,000, with an estimated useful life of 8 years and a salvage value of $10,000. The company uses the double-declining-balance method of depreciation; however, after year 3 they switch to the straight-line method. There is no change to the estimated useful life or salvage value. What is the accumulated depreciation balance at the end of year 5 (round to the nearest dollar)? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)
$42,306
Aspen Ore purchased a vein of coal ore for $5,300,000. It is estimated that 32,000,000 tons of ore are available to be extracted. The estimated depletion expense for this year's extraction of 2,790,000 tons of ore is: (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)
$474,300.
A company purchased a computer system on March 1. Its cost was $40,000, and it had an estimated salvage value of $5,000. It was expected to have a useful life of five years. To the nearest dollar, the depreciation for year 1 using straight-line depreciation will be: (Assume company year-end is December 31. Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)
$5,810.
Coyote, Inc. purchased a van for $68,000, with an estimated useful life of 5 years and a residual value of $8000. The company uses the double-declining-balance method of depreciation; however, for year 3 they switch to the straight-line method. There is no change to the estimated useful life or residual value. What is the accumulated depreciation balance at the end of year 4? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)
$54,506
A building was purchased on August 1 for $490,000. It has a salvage value of $38,000 and a useful life of 30 years. To the nearest dollar, how much will the depreciation expense for the building be for the first year ended December 31, using the straight-line method? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)
$6,278
Only Organics has a delivery truck that was purchased for $48,000 and has a salvage value of $4,000. It expects the truck to last 200,000 miles. During Year 1, the truck traveled 32,500 miles and during Year 2, the truck traveled 29,500 miles. What is the depreciation expense for Year 2 to the nearest dollar using the units-of-production method? (Round any intermediary calculations to two decimal places and your final answer to the nearest dollar.)
$6,490
A new vehicle was purchased on January 1 for $46,000. It has a salvage value of $7,000 and a useful life of 6 years. To the nearest dollar, how much will the depreciation expense for the vehicle be for the first year using the straight-line method?
$6,500
A company purchased a computer system on March 1. Its cost was $55,000 and it had an estimated salvage value of $10,000. It was expected to have a useful life of 5 years. To the nearest dollar, the depreciation for year 2 using straight-line depreciation will be: (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)
$9,000.
Rose Corp. purchased land for $77,000. Additionally, Rose paid title insurance of $700, a commission of $7,000, and back taxes due in the amount of $1,000. To ready the land for construction, Rose paid $3,000 to remove an unwanted building, $6,000 to level and grade the property, and $12,000 for paving. The cost of the company's land is _______, and the land improvements are _______.
$94,700 $12,000
Metropolitan Masonry made a basket purchase of three items. Item X was appraised at $39,000; item Y was appraised at $57,000 and item Z was appraised at $61,000. The purchase price was $129,000. The amount at which item Y should be recorded is:
($57,000/$157,000) × $129,000.
Patents to produce and sell inventions are conveyed by the federal government for a period of:
20 years.
Sydney's Siding made a basket purchase involving four assets. Their market values were A: $41,000; B: $40,000; C: $45,000; and D: $54,000. The price Sydney's paid for the four assets was $170,000. What percentage of the $170,000 price would be allocated to asset C to the nearest one-tenth of a percent? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)
25%
Copyrights to protect various forms of media are conveyed by the federal government for a period of:
70 years beyond the author's life.
Caesar Company acquired Illusions, Inc. three years ago, and the purchase included $75,000 of goodwill. Illusion's goodwill now has a fair value of $60,000 - how would Caesar account for this difference?
A journal entry will be made - debiting Loss on Impairment of Goodwill for $15,000 and crediting Goodwill for $15,000.
Which of the following would NOT be considered part of the cost of machinery and equipment? A) Repairs and maintenance after start-up B) Delivery charges C) Installation costs D) In-transit insurance costs
A) Repairs and maintenance after start-up
Which of the following would be considered part of the cost of machinery and equipment? A) Sales taxes B) Repairs after start-up C) Maintenance D) Insurance after purchase
A) Sales taxes
Costs that should be charged to the land account include: A) the cost of removing unwanted buildings. B) paving the parking lot. C) installing fences. D) the cost of a sign.
A) the cost of removing unwanted buildings.
Which of the following accounts would be debited in a journal entry for an asset exchange involving vehicles? A) Accumulated Depreciation-Old Vehicle B) Old Vehicle C) Gain on Exchange of Assets D) Notes Payable
Accumulated Depreciation-Old Vehicle
KLF Co. inadvertently recorded a $7,000 betterment as an ordinary repair. Which of the following will occur as a result of this mistake?
Assets will be understated by $7,000.
A company replaced an engine on a vehicle and debited the amount to Repairs and Maintenance expense, rather than debiting the Vehicle account. Which of the following would occur because of this error?
Assets would be understated.
13) Which of the following would be included in the cost of a constructed building? A) Purchase price of the building B) Payments for material, labor, and overhead C) Survey and legal fees D) Realtor commissions
B) Payments for material, labor, and overhead
Which of the following would be considered part of the cost of a printing press? A) The medical fees for a worker who was injured while installing the press B) The cost of a test run to make sure the press worked properly C) Both A and B are part of the cost of the printing press. D) Neither A nor B are part of the cost of the printing press.
B) The cost of a test run to make sure the press worked properly
Which of the following accounts would be credited in a journal entry for an asset exchange involving vehicles? A) Accumulated Depreciation-Old Vehicle B) Vehicle (Old) C) Loss on Exchange of Assets D) Vehicle (New)
B) Vehicle (Old)
Equipment costing $123,000 has accumulated depreciation of $95,000. The equipment is a trade-in for new equipment costing $188,000. If the trade-in value received for the old equipment is $34,000, the journal entry to record this transaction is to:
B) debit Equipment (New) for $188,000, debit Accumulated Depreciation - Equipment for $95,000, credit Equipment (Old) for $123,000, credit Cash for $154,000, credit Gain on Exchange of Assets for $6,000.
Which of the following would NOT be considered part of the cost of the land? A) Survey and legal fees B) Realtor commissions C) Paving D) Unpaid property taxes on the land
C) Paving
Which of the following would be considered part of land improvements? A) Removal of unwanted building on the land B) Title transfer fees C) Paving of the parking lot D) Surveying fees
C) Paving of the parking lot
Which of the following would NOT be considered as part of the cost of a constructed building? A) Building permit fees B) Contractor charges C) Realtor commissions D) Architectural fees
C) Realtor commissions
Which of the following would be considered as part of the cost of purchasing an existing building? A) Architectural fees B) Contractor charges C) Title transfer fees D) Payment for materials
C) Title transfer fees
Which of the following would NOT be considered a fixed asset? A) office equipment B) company car C) oil D) office building
C) oil
In accounting, what is the meaning of capitalized?
Capitalized means that an asset account is debited (increased) for the cost of an asset.
Which of the following would NOT be a part of land improvements? A) Paving of the parking lot B) Installing fences around the property C) Putting in sidewalks D) Grading and leveling the land
D) Grading and leveling the land
Which of the following would be considered a fixed asset? A) land B) patents C) timber D) both A and C are fixed assets
D) both A and C are fixed assets
TLR Productions pays $150,000 on January 1 to acquire a patent on a new production tool. It is expected that this patent's useful life will be 6 years. What will the journal entry be to record the first year's amortization?
Debit Amortization Expense $25,000 credit Patents $25,000
Which of the following is NOT true regarding depletion?
Depletion is computed in a similar manner to straight-line depreciation.
Which of the following would be debited as part of what you got in a transaction involving an exchange of assets?
Equipment (new)
A company replaced tires on a vehicle and debited the amount to Vehicle instead of Repairs and Maintenance Expense. Which of the following would occur because of this error?
Expenses would be understated.
Which intangible asset is recorded only when an acquiring company purchases another company?
Goodwill
Acme paid $120,000 for a machine with a $10,000 salvage value and an estimated life of 200,000 hours. Acme reports on a calendar year basis and used the machine for 1800 hours during the first year it owned the asset. Which of the following statements accurately compare the first year depreciation expense if the asset had been purchased on January 1 of the current year versus a March 1 acquisition date. (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)
In both cases, the Depreciation Expense is $990.
8) Which of the following would NOT be considered an intangible asset? A) Goodwill B) Franchise C) Land D) Copyright
Land
Which accounting principle dictates whether the cost of a repair should be expensed?
Matching
Sassycat Designs inadvertently recorded an expense as a capital expenditure. Which of the following will occur as a result of this mistake?
Net income will be overstated.
Which of the following is often rendered obsolete because of technological advancements?
Patent
Which of the following matches the correct cost allocation terms with the given assets?
Plant assets depreciation Intangible assets amortization Natural Resource depletion
Which of the following is NOT a classification for marketable securities? A) Saleable securities B) Available-for-sale securities C) Trading securities D) Held-to-maturity securities
Saleable securities
When calculating depletion, what is the proper treatment of residual value?
There is no residual value in the calculation of depletion expense.
Which of the following would be considered a natural resource? A) Corn B) Livestock C) Timber D) Wheat
Timber
Patents, copyrights, and trademarks are:
amortized
Upgrading the RAM on a computer would be an example of a(n):
betterment.
Nike would be an example of a:
brand name.
Accumulated depletion is a(n):
contra-asset account.
A truck costing $70,000 has accumulated depreciation of $51,000. The truck is scrapped for $0. The journal entry to record this transaction is to:
debit Accumulated Depreciation - Truck for $51,000, debit Loss on Disposal $19,000, credit Truck for $70,000.
A truck costing $56,000 has accumulated depreciation of $50,000. The truck is scrapped for $700. The journal entry to record this transaction is to:
debit Cash for $700 debit Accumulated Depreciation - Truck for $50,000, debit Loss on Disposal for $5,300 credit Truck for $56,000.
A truck costing $56,000 has accumulated depreciation of $47,000. The truck is sold for $8,500. The journal entry to record this transaction is to:
debit Cash for $8,500, debit Accumulated Depreciation - Truck for $47,000, credit Truck for $56,000, credit Gain on Disposal for $500.
It is determined that a computer's depreciation expense for the year is $3,500. The journal entry to record this will be:
debit Depreciation Expense - computer $3,500 credit Accumulated Depreciation, $3,500.
Equipment costing $120,000 has accumulated depreciation of $97,000. The equipment is a trade-in for new equipment costing $190,000. If the trade-in value received for the old equipment is $36,000, the journal entry to record this transaction is to:
debit Equipment (New) for $190,000, debit Accumulated Depreciation - Equipment for $97,000, credit Gain on Exchange of Assets for $13,000, credit Equipment (Old) for $120,000 credit Cash for $154,000.
Equipment costing $73,000 has accumulated depreciation of $54,000. The equipment is a trade-in for new equipment costing $90,191. If the trade-in value received for the old equipment is $15,000, the journal entry to record this transaction is to:
debit Equipment (New) for $90,191, debit Accumulated Depreciation - Equipment for $54,000, debit Loss on Exchange of Assets for $4,000, credit Equipment (Old) for $73,000 and credit Cash for $75,191.
A patent has amortization this year of $2,300. The journal entry would be to:
debit amortization expense-patent, $2,300 credit patent, $2,300.
Manitou, Inc. purchased land for $94,000 by signing a note payable for the same amount. Additionally, Manitou paid cash for the following: title insurance of $1,600, a commission of $9,400, $5,000 to remove an unwanted building, $3,400 to level and grade the property, $26,000 for paving, $23,000 to construct a fence around the perimeter, and $5,400 for lighting. The journal entry for the cash payment is:
debit land $19,400 debit land improvement $54,400, credit cash $73,800
Betta Group purchased Danio, Inc. for $960,000. The market value of Danio's assets and liabilities at the time of purchase were $1,300,000 and $360,000 respectively. The journal entry to record this will include:
debit to Asset accounts for $1,300,000, debit to Goodwill $20,000, credit to Liabilities $360,000 credit to Cash $960,000.
Properties whose physical substance consists of natural resources that are consumed in the operation of a business are called:
depletable assets.
Minerals, timer and coal are:
depleted
Cost divided by the total amount of the natural resource to be removed yields:
depletion rate per unit for the period.
Equipment, buildings, and vehicles are:
depreciated
Other than land, long-term assets that are capitalized are:
depreciated over the life of the asset.
If an asset produces more revenue in its early years, the depreciation method best suited for this asset would be the:
double-declining balance method.
The depreciation method often used for income tax purposes is the:
double-declining balance method.
Information needed to compute a depletion charge per unit includes the:
estimated total amount of resources available for removal.
Research and development costs (R&D) are generally:
expensed and become part of the Income Statement.
A repair that extends the useful life of an asset would be considered a(n):
extraordinary repair.
The cash registers at WalMart are an example of a(n) _______, which would be expensed through _________.
fixed asset depreciation
The Miami Dolphins and New York Yankees are examples of:
franchised teams.
Classy Cooks did a major overhaul of their ovens, which extended the useful life of the ovens by 4 years. The journal entry to record this included a debit to repairs expense. This entry is:
incorrect, and as a result net income will be understated.
Assets that CANNOT be seen, touched, or held are called:
intangible assets.
Subtracting accumulated depletion from the asset account coal mine would yield the:
net book value of the coal mine.
Lubricating a machine on a regular basis would be considered a(n):
ordinary repair.
According to GAAP, goodwill is:
recorded as a loss only when the goodwill is losing value.
After an asset is fully depreciated, the asset:
remains on the Balance Sheet at (cost - Accumulated Depreciation).
If an asset generates revenue evenly over time, the depreciation method best suited for this asset would be the:
straight-line method.
The total cost allocated to each item in a basket purchase is based upon:
their relative market values.
McDonald's "golden arches" are an example of a(n) _______, which would be classified as a(n) _______.
trademark intangible asset
A manufacturer may identify its product with a unique symbol and prevent other manufacturers from using the same symbol by obtaining a:
trademark.
The slogan "Can you hear me now?" for Verizon is a protected slogan called a:
trademark.
Torres Co. has installed a piece of machinery for a total of $45,000. In its third month of operation, repairs of $900 had to be made on the machine. This $900 would be:
treated as a repairs and maintenance expense.
If an extraordinary repair is incorrectly expensed in the current period, the net income for that period will be:
understated and net income in future periods will be overstated.
A method best suited for depreciating items, such as copy machines and vehicles, would be the:
units-of-production method.
If the amount harvested in a timber operation was different every year for four years, you would:
use the same depletion expense rate per unit each year.
