The historical cost principle requires that when assets are acquired, they be recorded at Select one: a. market price. b. appralsal value. C. book value. d. cost.

On June​ 5, 2019, Mabel Company purchased an oil well for $600,000. The well contains an estimated $85,000 barrels of​ oil, with an estimated residual value of zero. During​ July, 2019, $21,500 barrels of oil were removed from the well. All of the oil went into inventory. What amount of Depletion Expense is recorded in​ July, 2019

$0

Robin Corporation purchased a forklift for $45,000 on July 1. The forklift has an estimated useful life of 25,000 usage hours with residual value of $4,000. Robin uses the units-of-production method for depreciation. If Robin uses the forklift for 6,500 hours during the first year, the depreciation expense on the forklift would be

$10,660 ( cost - residual ) / useful life, in units = depreciation per unit ( 45,000 - 4,000 ) / 25,000 = 1.64 depreciation per unit x year 1 hours = depreciation expense 1.64 x 6,500 = 10,660

​Tom's Roadside Burger Stand has a beginning balance in the Accumulated Depreciation—Equipment account of $220,000. The depreciation expense on the equipment for the year was $30,000. At the end of the​ year, the balance in the Accumulated Depreciation—Equipment account was $150,000. What was the accumulated depreciation on the equipment sold during the ​year

$100,000 220,000 + 30,000 - 150,000 = 100,000

On day 1 of its fiscal year, Cae Company purchased a new computer system for a total cost of $55,000. The computer system is expected to have a life of 10 years with a residual value of $7,000. If the company uses the double-declining-balance method, its depreciation expense for this computer system in the first year will be

$11,000 ( 1 / useful life, in years ) x 2 = DDB rate per year ( 1 / 10 ) x 2 = .2 Asset book value x DDB rate = DDB depreciation 55,000 x .2 = 11,000

Land, a building and equipment are acquired for a lump sum of $800,000. The market values of the​ land, building and equipment are $300,000​, $900,000 and $200,000​, respectively. What is the cost assigned to the​ equipment

$114,286 200,000 / (300,000 + 900,000 + 200,000) = .142857 800,000 x .142857 = 114,285.60

On January​ 4, 2019,​ Mary's Cafe acquired equipment for $500,000. The estimated life of the equipment is 8 years or​ 60,000 hours. The estimated residual value is $40,000. What is the balance in the Accumulated Depreciation account at December​ 31, 2020 if the straight−line method is​ used

$115,000 (500,000 - 40,000) / 8 = 57,500 57,500 x 2 years = 115,000

Jay Fuel purchased an oil well for $350,000. The well is estimated to contain 70,000 barrels, have a ten-year life, and have no residual value. If the company extracts and sells 2,800 barrels of oil in the first year, how much in cost of sales should be recorded

$14,000 purchase $ oil well / est. total barrels = depletion rate per barrel 350,000 / 70,000 = 5 depletion per barrel x number barrels sold = cost of sales year 1 5 x 2,800 = 14,000

On January​ 4, 2019,​ 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, 2020 if the straight−line method is​ used

$160,000 (700,000 - 60,000) / 8 = 80,000 80,000 x 2 year = 160,000

A company purchased mineral assets holding approximately 200,000 tons of ore for $800,000. The estimated residual value of the assets is zero. During the first year, 41,000 tons are extracted and sold. What is the amount of depletion for the first year

$164,000 mineral asset cost / total tons of ore = depletion rate 800,000 / 200,000 = 4 tons removed x depletion rate 41,000 x 4 = 164,000

George's Delivery pays $72 million to buy Lone Circle Overnight (LCO). The fair value of Lone Circle's assets is $85 million, and the fair value of its liabilities is $30 million. How much goodwill did George's Delivery purchase in its acquisition of Lone Circle Overnight

$17 million cost - ( sum assets LCO - LCO liability ) = goodwill cost 72 - ( 85 - 30 ) = 17

You buy land for $3,100,000 and spend $1,150,000 to develop the property. You then divide the land up as follows: 15 Hilltop lots $540,000 per lot 15 Valley lots $360,000 per lot How much did each Hilltop lot cost you?

$170,000 sales $ per lot hill / ( sales $ per lot hill + sales $ per lot vall ) = % of total market value 540,000 / ( 540,000 + 360,000 ) = 60% % of total market value x ( land cost + develop cost ) / number hill lots = cost per hilltop lot .60 x ( 3,100,000 + 1,150,000 ) / 15 = 170,000

Rory Company acquired equipment on July​ 1, 2019, for $900,000. The residual value is​ $20,000 and the estimated life is 5 years or​ 40,000 hours. Compute the depreciation expense for the years ending December​ 31, 2019 and December​ 31, 2020 if Rory Company uses the double − declining − balance method of depreciation

$180,000 for ​2019 $288,000 for 2020 1/life x 2 1/5 x 2 = 40% 2019: 900,000 x .4 x (6/12) = 180,000 2020: 720,000 x .4 = 288,000

Cal Company purchased a building and land for $560,000 in total. Individually, the land appraised for $206,500 and the building appraised for $383,500. How much of the purchase price should be allocated to the cost of the land

$196,000 mkt sales value / total mkt value = % of total mkt value land: 206,500 / 590,000 = 35% building: 383,000 / 590,000 = 65% total = 590,000 % total mkt value x total cost = cost of each asset land: .35 x 560,000 = 196,000 building: .65 x 560,000

Corbin Corporation acquired a machine for $31,000 and has recorded depreciation for two years using the straight-line method over a five-year life and $3,000 residual value. At the start of the third year of use, Corbin revised the estimated useful life to a total of 10 years. Estimated residual value declined to $0. How much depreciation should Corbin record in each of the asset's last eight years (that is, year 3-10), following the revision

$2,475 ( cost - residual ) / previous useful life x yrs used = deprec. for 2 yrs ( 31,000 - 3,000) / 5 x 2 = 11,200 ( cost - depreci. for 2 yrs ) / est. useful life remaining = new ann dep. ( 31,000 - 11,200 ) / 8 = 2,475

A company purchased an oil well for $270,000. It estimates that the well contains 90,000 barrels, has an eight year life, and no salvage value. If the company extracts and sells 7,000 barrels of oil in the first year, how much depletion expense should be recorded

$21,000 270,000/90,000 = 3 7,000 x 3 = 21,000

On January​ 2, 2019, Kora Corporation acquired equipment for $400,000. The estimated life of the equipment is 5 years or 90,000 hours. The estimated residual value is $10,000. What is the balance in Accumulated Depreciation on December​ 31, 2020, if Kora Corporation uses the double- declining − balance method of​ depreciation

$256,000 1/life x 2 1/5 x 2 = 40% 400,000 x .4 x = 160,000 240,000 x .4 = 96,000 160,000 + 96,000 = 256,000

Beck Company trades in old equipment for new equipment. The old equipment has a cost of $10,000 and accumulated depreciation of $8,000. Beck Company pays cash of $23,000. The fair value of the new equipment is $28,000. What is the gain or loss for Beck Company on the exchange of​ equipment

$3,000 gain 8,000 - 10,000 = (2,000) 28,000 - 23,000 = 5,000 Q

First Company purchased Second Company for $17,000,000 cash. At the time of​ purchase, Second​ Company's assets had a market value of $32,000,00 and the liabilities had a market value of $18,000,000. At the time of​ purchase, Second​ Company's assets had a book value of $11,000,000 and the liabilities had a book value of $12,000,000. What amount of goodwill is​ recorded?

$3,000,000 cost - (assets - liabilities) = goodwill 17 - (32 - 18) = 3

On January​ 1, 2019, a machine has a remaining book value of $5,400. The residual value of the machine is $1,500. The company uses the double−declining−balance method of depreciation. If 2019 is the last year for​ depreciation, what is Depreciation Expense for the year ending December​ 31, 2019

$3,900 5,400 - 1,500 = 3,900

Equipment purchased for $140,000 on January​ 1, 2020, was sold on July​ 1, 2023. The company uses the straight−line method of computing depreciation and recognizes $10,000 of depreciation expense annually. When recording the​ sale, the company should record a debit to Accumulated Depreciation−Equipment for:

$35,000

On January​ 2, 2019, Kira 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, 2020, if Kira Corporation uses the double−declining−balance method of​ depreciation

$384,000

Hamilton Company purchased a machine for $7,000 on January 1, 2016. The machine has been depreciated using the straight-line method assuming it has a four-year life with $1,000 residual value. Hamilton sold the machine on January 1, 2018 for $7,400. What is the book value of the machine on December 31, 2017

$4,000 ( cost - residual ) / useful life = annual depri. ( 7,000 - 1,000 ) / 4 = 1,500 cost - ( depreciation 2016 + depreciation 2017 ) = book value 7,000 - ( 1,500 + 1,500 ) = 4,000

Roho Company acquired equipment on July​ 1, 2019, for $200,000. The residual value is​ $20,000 and the estimated life is 5 years or​ 40,000 hours. Compute the depreciation expense for the years ending December​ 31, 2019 and December​ 31, 2020 if Roho Company uses the double−declining−balance method of depreciation

$40,000 for​ 2019 $64,000 for 2020 1/life x 2 1/5 x 2 = 40% Dec 31, 2019: 200,000 x .4 x (6/12) = 40,000 Dec 31, 2020: 160,000 x .4 = 64,000

Jerry Willis Company purchased equipment on May​ 1, 2019 for $3,000,000. The residual value is $25,000 and the estimated useful life is 10 years. What is the Depreciation Expense for the year ending December​ 31, 2019, if the company uses the double−declining−balance method

$400,000 1/useful life x 2 1/10 x 2 = 20% May 1 - December 31 = 8 months 3,000,000 x .2 x (8/12) = 400,000

On January​ 1, of the current​ year, Roadway Delivery Company purchased a truck for $50,000. Depreciation Expense is $3,000 per year. During the first year of​ use, the company paid $1,000 to repaint the truck and $1,900 for new tires. What is the total expense for the year ended December​ 31, end of current​ year

$5,900 3,000 + 1,000 + 1,900 = 5,900

Marjorie Corporation acquired a building on January​ 1, 2019, for $700,000. The building had an estimated useful life of 20 years and an estimated salvage value of $26,000. On January​ 1, 2021, Marjorie Corporation determined that the building could only be used for another 10 years and there would be no salvage value. Compute depreciation expense for the year ending December​ 31, 2021, if Marjorie Corporation uses straight−line depreciation

$63,260 (700,000 - 26,000) / 20 = 33,700 1st 2 years had 33,700 depreciation bc 20 year life 3rd year (2021) had 10 year life 700,000 - (33,700 x 2) = 632,600 632,600 / 10 = 63,260

Marjorie Corporation acquired a building on January​ 1, 2019, for $700,000. The building had an estimated useful life of 20 years and an estimated salvage value of $27,000. On January​ 1, 2021, Marjorie Corporation determined that the building could only be used for another 10 years and there would be no salvage value. Compute depreciation expense for the year ending December​ 31, 2021, if Marjorie Corporation uses straight−line depreciation

$63,270 (700,000 - 27,000) /20 = 33650 year 1 and year 2 had 20 year determined life year 3 had 10 year determined life so: 700,000 - (33,650 x 2) = 632,700 for year 2021: 632,700 / 10 = 63,270

Greenery Company purchased a delivery van for $35,000 on January 1. The van has an estimated 4-year life with a residual value of $4,500. What would the depreciation expense for this van be in the first year if Greenery uses the straight-line method

$7,625 ( purchase price - residual ) / useful life = depreciation expense ( 35,000 - 4,500 ) / 4 = 7,625

units of production

(cost - residual value) / useful life in units

Martin Company paid $1,200,000 for equipment. Martin uses straight−line depreciation. Currently the Accumulated Depreciation account shows a balance of $480,000. If the asset has no residual value and an estimated life of 10​ years, how many years has the asset been​ depreciated

4 cost - residual / life, years = depreciation 1,200,000 - 0 / 10 = 120,000 480,000 / 120,000 = 4 years of depreciation

At the beginning of last year, Bills Corporation purchased a piece of equipment for $59,000. The equipment has a life of five years or 100,000 hours. The estimated residual value is $9,000. Bill used the equipment for 20,000 hours last year and 23,000 hours this year. Depreciation expense for year two using double-declining-balance (DDB) and units-of-production (UOP) methods would be as follows

DDB = $14,160 ; UOP = $11,500 For DDB: ( 1 / useful life, in years) x 2 = DDB dep. rate ( 1 / 5 ) x 2 = .40 year 1 Asset book value x DDB rate = DDB depri. 59,000 x .40 = 23,600 year 2 Asset book value x DDB rate = DDB depri. 35,400 x .40 = 14,160 For UOP: ( cost - residual value ) / useful life, in uop = depreciation per unit ( 59,000 - 9,000 ) / 100,000 = .5 Depreciation per unit (hour) x number of units (hours) = UOP depreci .5 x 23,000 = 11,500

Which statement about depreciation is false

Depreciation should not be recorded in years in which the market value of the asset has increased

Ally Incorporation uses the double-declining-balance method for depreciation on its computers. Which item is not needed to compute depreciation for the first year

Estimated residual value

When a company expenses the cost of maintenance for its heating and cooling system, that cost will appear on its

Income statement

If a plant asset is sold and a loss is incurred, the entry to record the sale would include a credit to

Plant asset

Samson Company has a machine with the following​ data: Net book value: $940,000 Estimated future cash flows: $780,000 Fair value: $63,000 Is the machine​ impaired

Yes, the estimated future cash flows from the machine are less than the net book value of the machine

​Koala, Inc, sold equipment for $5,300 cash. The equipment cost $74,300 and had accumulated depreciation through the date of sale of $70,000. At the date of​ sale, the journal entry to record the sale will​ have:

a Gain on Sale of Equipment for $1,000 74,300 - 70,000 = 4,300 5,300 - 4,300 = 1,000 gain

A capital expenditure

adds to an asset

Capitalizing a cost involves increasing what type of account

asset

On June​ 1, Roadway's Trucking Company paid $4,000 to overhaul the engine on a delivery truck to allow it to be used for two additional years. It also paid $7,100 to change the storage capacity of the truck so that it could haul more merchandise. Which of the following statements is​ TRUE?

both are capital expenditures

Impairment loss

net book value - fair value

Carrie Company failed to record depreciation of equipment. How does this omission affect Carrie's financial statements

net income is overstated and assets are overstated

Gain or loss on sale

sales proceeds - book value

Gain / Loss on sale

sales value- book value

Equipment with a historical cost of $100,000 and Accumulated Depreciation of $45,000 is junked. No cash is received upon disposal. Which journal entry is​ necessary

debit Accumulated Depreciation− Equipment for $45,000​, debit Loss on Disposal of Equipment for $55,000 and credit Equipment for $100,000

Miley Corporation sold equipment costing $73,000 with $66,000 of accumulated depreciation for $11,000 cash. Which of the following journal entries should be​ prepared

debit Cash for $11,000​ debit Accumulated Depreciation− Equipment for $66,000​ credit Equipment for $73,000 credit Gain on Sale of Equipment for $4,000

The depreciation method that does not initially use the residual value in depreciation calculations is the

double-declining balance method

In calculating the total cost of land, all costs are included except

fencing

Beck Company trades in old equipment for new equipment. The old equipment has a cost of $10,000 and accumulated depreciation of $8,000. Beck Company pays cash of $21,000. The fair value of the new equipment is $30,000. What is the gain or loss for Beck Company on the exchange of​ equipment

gain $7,000 8,000 - 10,000 = (2,000) 30,000 - 21,000 = 9,000 gain of 7,000

losses and gains

gain - always has a credit balance loss - always has a debit balance

which intangible asset is not amortized

goodwill

Which of the following are costs reported on a company's income statement and balance sheet

i/s - cost of goods sold b/s - accumulated depreciation

Which of the following statements is true

intangible assets are amortized

Final net book value

is equal to the residual value

Barbarino Corporation purchased land and a building for $1,700,000. An appraisal indicates that the​ land's market value is $700,000 and the​ building's market value is $1,300,000. When recording this transaction Barbarino should​ debit:

land for $595,000 700,000 / (700,000 + 1,300,000) = 35% 1,700,000 x .35 = 595,000

Whitmore Corporation purchased a new delivery truck van on the last day of the fiscal year. The cost of the delivery truck will appear on Whitmore's

Balance sheet

Book value

cost - accumulated depreciation

depreciable cost

cost - residual value

Ali Corporation purchased land for a new building. Which of the following costs would not be included in the cost of the land A. Purchase price of the land. B. Cost of new parking lot constructed on the land C. Brokerage commission paid to the real estate agent who handled the land transaction D. Cost of demolishing an old garage located on the land

cost of new parking lot constructed on the land

The entry to record annual depreciation includes a

credit to Accumulated Depreciation

Which of the following statements indicates that an asset is impaired

the net book value of the asset is more than the asset's estimated future cash flows