Ch 9

The entry to record the purchase of \$10,000 of equipment by signing an \$8,000 note and paying the rest with cash is recorded with a

$10,000 debit to Equipment and $8,000 credit to Notes Payable and $2,000 credit to Cash

On January 11, Ace Electronics bought a new cash register for $2,500. In calculating depreciation expense for the year ended December 31 , Ace's accountant will assume that the cash register was purchased on

Jan 1

True or false: Long-lived assets (except land) are expensed over their useful lives

True

depreciation methods are allowed by GAAP?

Units of production Straight line Declining balance

The effect of capitalizing a cost that should have been expensed causes

assets to be overstated on the balance sheet and expenses to be understated on the Income statement

On January 1, We-Haul sold its truck for $40,000. The truck's cost was $110,000 and its Accumulated Depreciation was $60,000. The effect the sale of the truck on the accounting equation includes a (Check all that apply )

$10,000 decrease to total assets $10,000 decrease to SE

The list price of a computer was $100,000. The sales tax on the computer was 5%. The delivery cost was $1,000. The cost to assemble the computer was $500. The Equipment account should be debited for a total of

$106,500

X Circle Company purchased a computer system Black Box, incwith a price of $100,000 plus 5\% sales tax. The cost to deliver and install the computer was \$10,000 . The debit to Equipment equals

$15,000

On January 1, Busy Beaver, Inc., signed a $ 315,000, 5-year note payable to buy a new industrial veneer cutter. Busy Beaver plans to use the machine for 10 years and then sell it for its scrap value of $5,000. Using straight-line depreciation, Depreciation Expense for the 1st year ended December 31 equals

$31,000 (cost- residual value) x 1/useful life ($315,000- $5,000)x1/10

Vango, Inc. bought a new delivery van during the year . Which of these costs should be expensed as ordinary repairs and maintenance? (Check all that apply.)

$900 for cleaning the van during the year $100 oil change on van

Calculating straight line depreciation

(Cost-residual value) x(1/useful life)

Busy Beaver, Inc. signed a \$315,000 , 5-year note payable to buy a new industrial veneer cutter Busy Beaver paid $5,000 cash for transportation of the machine and $750 cash for installation costs. The journal entry to record this transaction will include a(Check all that apply)

- $5,750 credit to Cash - $320,750 debit to Machinery - $315,000 credit to Note Payable

On January 1Whittle , Inc. purchased timber rights for $2,000,000 which is expected to produce a total of 2,000,000 cords of wood over 4 years , after which it will be sold for $500,000 . The cords of wood cut were 200,000 the 1st year. The effect of recording the 1st year's depletion (not the sale of the wood) on the accounting equation is (Check all that apply. )

- the asset, Timber Inventory , is increased - assets are decreased by increasing the contra- account, Accumulated Depletion

On-a-RollInc. amortizes patent of $20,000 over 20 years. The adjusting entry to record amortization results in a(n)\ (Check all that apply.)

-decrease to assets on the balance sheet -decreases to net income on the income statement Explanation: Amortization is recorded with a debit to Amortization Expense, which decreases net income, and a credit to Patent, which decreases assets

long-term asset, inventory, and COGS

-original cost: Long-term Asset - amount depleted and reported on BS: Inventory - amount of natural resource removed from BS and matched with related revenues: Cost of Goods Sold

Which of the following result in an increase to intangible assets? (Check all that apply)

2) a company purchased another company for $ 10,000 more than its net assets 4) a company purchased a franchise for $100,000 5) $10,000 was spent to purchase a patent

The difference between the Equipment account and Accumulated Depreciation called the

Book value

Miss Hap, the bookkeeper, forgot to record the depreciation for the year. This error will cause

Assets and SE to be overstated

Accountants say costs have been _______ when they are recorded as assets rather than as expenses

Capitalized

Quiche & TellInc. has discovered that its goodwill has been Impaired because the secret recipe it received when it purchased its competitor is no longer a secret. Recording this Impairment will

Cause a decrease in SE

Depreciable cost equals an asset's

Cost - it's residual (or salvage) value

The adjusting entry to record depreciation debits and credits what?

Debits- depreciation expense Credits- accumulated depreciation

long-lived productive assets?

Delivery equipment Machinery NOT: Inventory Cash

Another term for long-lived tangible assets _______ assets and is found on the financial statement called the _________ __________

Fixed Balance sheet

Depreciation is not intended to report an asset at its current value

NOT CORRECT: Depreciation expense reflects the decrease in the current value of an asset over time. An asset's cost minus its accumulated depreciation is equal to its selling price. An asset's book value is always less than its selling price .

Depreciation and impairment are different in that only

Only impairment represents the decline in the current value of the related asset

The expenditure incurred for changing the oil in the company's fleet of trucks is debited to

Repairs and Maintenance Expense

Both Spam Am Airlines and TWB Airlines used straight-line depreciation for a $20 million jet. Spam Am used an estimated 35 year useful life and TWB Airlines used an estimated 25 year life for its planes but estimated similar residual values. As result of the differences in useful lives, which company will appear more profitable?

Spam Am

Where is depreciation expense recorded? Accumulated depreciation?

income statement balance sheet

Match each depreciation method with the applicable description

straight- line: does the best job of matching the expense with the related revenue when an asset is used evenly over its useful units- of-production: is the best method to use when the amount of an asset's use varies significantly from one accounting period to another declining-balance: is the best method to use when an asset is productive in its earliest years but quickly loses its usefulness