ACC exam ch 7 - 10 hw questions

Accumulated depreciation is:

A contra-asset.

Early in the fiscal year, The Beanery purchases a delivery vehicle for $40,000. At the end of the year, the machine has a fair value of $33,000. The company controller records depreciation expense of $7,000 for the year, the decline in the vehicle's value. Is the company controller's approach to recording depreciation expense correct?

no

On October 1, a franchise was purchased for $2,000,000. The franchise agreement is for 10 years. What is the amount of amortization expense by the end of the first year, December 31 (using partial year straight-line amortization)? (Do not round intermediate calculations.)

$50,000.

A company purchased land and building from a seller for $900,000. A separate appraisal reveals the fair value of the land to be $200,000 and the fair value of the building to be $800,000. For what amount would the company record land at the time of purchase?

180,000

Equipment originally costing $100,000 has accumulated depreciation of $65,000. If it is sold for $40,000, the company should record:

A gain of $5,000.

Equipment originally costing $65,000 has accumulated depreciation of $25,000. If the equipment is sold for $30,000, the company should record:

A loss of $10,000.

Depreciation in accounting is the:

Allocation of an asset's cost to an expense over time.

Which of the following correctly describes the nature of depreciation?

Depreciation represents the allocation of the cost of property, plant, and equipment over its service life.

Mainline Produce Corporation acquired all the outstanding common stock of Iceberg Lettuce Corporation for $30,000,000 in cash. The book values and fair values of Iceberg's assets and liabilities were as follows: Required: Calculate the amount paid for goodwill. (Enter your answer in millions (i.e. 1,000,000 should be entered as 1).)

Note: picture is part of the question. Goodwill = Purchase price - Fair value of identifiable net assets Fair value of identifiable net assets = Fair value of assets acquired - fair value of liabilities assumed 14.4 + 26.2 +4.4 = 45 7.8 + 12.2 = 20 45 - 20 = 25 30 - 25 = 5 amount paid for goodwill : 5 million

The balance in the Accumulated Depreciation account represents

The amount charged to depreciation expense since the acquisition of the plant asset.

The amount of the gain on the sale of equipment equals:

The selling price minus the book value of the equipment.

Speedy Delivery Company purchases a delivery van for $36,000. Speedy estimates that at the end of its four-year service life, the van will be worth $6,400. During the four-year period, the company expects to drive the van 148,000 miles. Actual miles driven each year were 40,000 miles in year 1 and 46,000 miles in year 2. Required: Calculate annual depreciation for the first two years of the van using each of the following methods. (Do not round your intermediate calculations.) rev: 04_08_2019_QC_CS-164606

activity based: depreciation rate per mile = (initial cost - residual value) ÷ expected miles depreciation expense = depreciation rate per mile X actual miles driven in the year (36,000 - 6,400) ÷ 148,000 = 0.20 0.20 X 40,000 miles = 8,000 yr 1 0.20 X 46,000 miles = 9,200 yr 2

El Tapitio purchased restaurant furniture on September 1, 2021, for $45,000. Residual value at the end of an estimated 10-year service life is expected to be $6,000. Calculate depreciation expense for 2021 and 2022, using the straight-line method, and assuming a December 31 year-end. (Do not round intermediate calculations.)

depreciation expense: 2021: 1,300 2022: 3,900 2021: $3,900 X 4/12 = $1,300 2022: ($45,000 -$6,000) ÷ 10 yrs = $3,900 per year

Red Rock Bakery purchases land, building, and equipment for a single purchase price of $600,000. However, the estimated fair values of the land, building, and equipment are $175,000, $455,000, and $70,000, respectively, for a total estimated fair value of $700,000. Required: Determine the amounts Red Rock should record in the separate accounts for the land, the building, and the equipment.

land: $175,000 ÷ 700,000 = 0.25 or 25% Building: $455,000 ÷ 700,000 = 0.65 or 65% Equipment: $70,000 ÷ 700,000 = 0.1 or 10% AMOUNT OF BASKET PURCHASE: land: $600,000 X 0.25 = $150,000 Building: $600,000 X 0.65 = $390,000 Equipment: $600,000 X 0.1 = $60,000

Piper's Pizza sold baking equipment for $25,000. The equipment was originally purchased for $72,000, and depreciation through the date of sale totaled $51,000. What was the gain or loss on the sale of the equipment?

$72,000 - $51,000 = $21,000 Book value •sold for $25,000 so... $25,000 - $21,000 = $4,000 $4,000 Gain on sale of equipment

Omaha Beef Co. purchased a delivery truck for $50,000. The residual value at the end of an estimated eight-year service life is expected to be $10,000. The company uses straight-line depreciation for the first six years. In the seventh year, the company now believes the truck will be useful for a total of 10 years (four more years), and the residual value will remain at $10,000. Calculate depreciation expense for the seventh year.

($50,000 - $10,000) ÷ 8yrs = $5,000 $5,000 X 6yrs = $30,000 $50,000 - $30,000 = $20,000 ($20,000 - $10,000) ÷ 4yrs = $2,500 depreciation expense for the 7th year: $2,500

Speedy Delivery Company purchases a delivery van for $36,000. Speedy estimates that at the end of its four-year service life, the van will be worth $6,400. During the four-year period, the company expects to drive the van 148,000 miles. Actual miles driven each year were 40,000 miles in year 1 and 46,000 miles in year 2. Required: Calculate annual depreciation for the first two years of the van using each of the following methods. (Do not round your intermediate calculations.) rev: 04_08_2019_QC_CS

3600 - 6,400 ÷ 4 = 7,400 straight- line method means its the same every year.

The asset's cost less accumulated depreciation is called:

Book value.