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.