Smart book 7 accounting

Using the declining balance method, depreciation will be

higher in earlier years, but lower in later years.

On January 1, year 1, Clem Corp. purchased equipment for $160,000. The equipment has a residual value of $10,000, and has a life of 100,000 hours. Clem uses the activity-based method of depreciation. In year 1, Clem used the machine 2,000 hours, and in year 2, Clem used the machine 3,000 hours. Which of the following statements is true?

Clem will depreciate the machine for $150,000 over its service life.

Krasel Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $90,000, and its accumulated depreciation at the date of exchange was $70,000. The new asset received had a fair value of $50,000 and a book value of $45,000. The journal entry to record this exchange will include which of the following entries?

Credit gain on exchange of asset $30,000 Credit equipment $90,000 Debit accumulated depreciation $70,000 Debit equipment $50,000

Which of the following are long-term tangible assets?

Equipment Property

True or false: Goodwill is the intangible value of a company's employees, management team, and business location that is recorded by the company.

False

Which of the following items are capitalized in the cost of land?

Grading the land Legal fees to secure title Costs to remove an old building Title insurance Commissions

Purchased intangible asset

Patents, copyrights, trademarks, or franchise rights acquired from other companies.

Internally developed intangible asset

Product or process created internally for which patent may be obtained.

What are the financial statement effects of using the declining balance method of depreciation as compared to the straight-line method in the first year of an asset's life?

Total assets are lower. Net income is lower.

Which of the following does not differ among the different depreciation methods?

Total depreciation recognized over the asset's service life.

A retirement or abandonment of an asset is different from a sale of an asset because

a loss must be recognized for the remaining book value. no cash is received.

An estimated residual value _________ the total amount of depreciation recorded over an asset's service life.

lowers

Otto Inc. retires old equipment with a book value of $2,400. Otto should

recognize a loss of $2,400

The depreciable cost of an asset is the asset's cost minus its estimated ____ value.

residual

When an asset is no longer useful, but cannot be sold, we have a

retirement

At the beginning of year 1, Valerie Corp. purchases equipment for $10,000. The equipment has a residual value of $4,000 and an expected service life of 4 years. What is straight-line depreciation for year 1?

$1,500

The formula to calculate an activity-based depreciation rate is:

(cost - residual value)/estimated total production.

When selling a fixed asset, the seller recognizes a gain or loss for the difference between the amount received and the ______ value of the asset sold.

book

Straight-line

commonly used for financial statement purposes

MACRS

commonly used for tax reporting

The journal entry to retire old equipment that is not fully depreciated includes a:

debit to loss credit to equipment debit to accumulated depreciation

When a company purchases another company and the purchase price is greater than the fair value of the net assets acquired, this excess is referred to as ______.

goodwill

Amortization refers to the allocation of the cost of assets to expense.

intangible

The depreciable cost is

the cost of the asset minus the residual value.

Total depreciation recorded over an asset's service life is:

the same regardless of the depreciation method used

Other terms used for an activity-based depreciation method are:

units of output method units of production method

Wall Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $100,000, and its accumulated depreciation at the date of exchange was $60,000. The new asset received had a fair value of $80,000 and a book value of $65,000. The journal entry to record this exchange will include which of the following entries?

Debit equipment $80,000 Credit gain on exchange of asset $40,000 Credit equipment $100,000 Debit accumulated depreciation $60,000

Units of production or units of output are alternative terms for the - depreciation method.

activity based

The gain or loss on disposal of an asset is calculated as:

amount received less the book value of asset sold

Long-term tangible assets include

buildings. land. equipment.

The profit margin ratio is defined as ____________ ___________ divided by net sales.

net income

Which of the following costs should be capitalized in the costs of acquiring a building?

realtor commissions legal fees to obtain title purchase price Remodeling building Realtor commissions Legal fees to obtain title

At the beginning of year 1, Looby Corp. purchases equipment for $100,000. The equipment has a residual value of $20,000 and an expected service life of 10 years. What is straight-line depreciation for year 1?

$8,000