Financial and Managerial Accounting Chapter 8

On October 30, Cleo Co. purchased a machine for $26,000 and estimates it will use the machine for four-years with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine's first year partial depreciation expense for October 30 through December 31. Multiple choice question. $1,000 $3,000 $1,500 $6,000

1,000

Which of the following situations will result in recognizing a gain on sale of a plant asset? Multiple choice question. An asset with a book value of $2,000 is sold for $1,500. A fully depreciated asset is sold for $1,000. A fully depreciated asset is discarded. An asset that cost $5,000 with accumulated depreciation of $3,000 is sold for $1,500. An asset with book value of $2,000 is sold for $2,000.

A fully depreciated asset is sold for $1,000.

______ is the process of allocating the cost of a plant asset to expense while it is in use. Multiple choice question. Depletion Amortization Depreciation Allocation

Depreciation

On December 31, Briar Co. disposed of a piece of equipment that cost $6,000 with accumulated depreciation of $4,500. The entry to record this disposal would include a debit to which account and for how much? Accumulated Depreciation for $6,000 Depreciation Expense - Equipment for $1,500 Equipment for $6,000 Loss on Disposal of Equipment for $1,500

Loss on Disposal of Equipment for $1,500

Which of the following factors determine depreciation? (Check all that apply.) Multiple select question. Current market value of asset Useful life Appraisal of asset Book value Cost of asset Salvage value

Useful life Cost of asset Salvage value

On June 1, Harding Co. purchased a machine for $14,000 and estimates it will use the machine for five-years with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine's first year (partial) depreciation expense for June 1st through December 31st. Multiple choice question. $1,400 $1,200 $2,400 $2,800 $1,000

$1,400

Ion Co. purchased land for $190,000. Ion also paid $5,000 in real estate commissions, $1,000 in legal fees, and $500 in title insurance fees. Ion should record the cost of this land at: Multiple choice question. $195,500 $196,000 $196,500 $190,000 $195,000

$196,500

Plant assets should be recorded at cost, including all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use. This would include which of the following costs? (Check all that apply.) Multiple select question. Shipping charges Fines incurred for failing to get the correct permits Repairs necessary for damages incurred during installation Testing Assembling

Shipping charges Testing Assembling

Land ______ are assets that are additions to land and have limited useful lives, such as walkways and fences.

improvements

On June 1, Harding Co. purchased a machine for $14,000 and estimates it will use the machine for five-years with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine's first year (partial) depreciation expense for June 1st through December 31st. Multiple choice question. $2,800 $1,400 $1,200 $2,400 $1,000

$1400

Alin Co. purchases a building for $300,000 and pays an additional $30,000 for title fees and lawyer fees. Alin also pays $20,000 in renovations, including painting, carpet, lighting, etc. Alin should record the cost of the building at: $330,000. $350,000. $320,000. $300,000.

$350,000.

On January 3, ATA Company purchases a copy machine for $11,500. The machine is expected to last five years and have a salvage value of $1,500. Compute depreciation expense for the first year, assuming the company uses the straight-line method. Multiple choice question. cost- minus salvage/useful life $2,300 $2,000 $2,600

11,500-1,500=10000 10,000/5 years=2000

Multiple Choice Question On December 31, Briar Co. disposed of a piece of equipment that cost $6,000 with accumulated depreciation of $4,500. The entry to record this disposal would include a debit to which account and for how much? Multiple choice question. Depreciation Expense - Equipment for $1,500 Loss on Disposal of Equipment for $1,500 Equipment for $6,000 Accumulated Depreciation for $6,000

Loss on Disposal of Equipment for $1,500

Forward Co. discarded a machine that cost $5,000 and was fully depreciated. The entry to record this transaction would include a credit to the _________ account. Multiple choice question. Accumulated Depreciation - Machinery Machinery Depreciation Expense - Machinery Loss on Disposal of Machinery

Machinery

A plant asset is _______ (depreciated/discarded/obsolete) when it is no longer useful to the company, and it has no market value.

discarded

Assets that increase the benefits of land, have a limited useful life, such as parking lots and lighting systems, are called: Multiple choice question. land additions land structures land improvements land

land improvements

The purchase of a group of plant assets for one price is called a ______ purchase.

lump-sum

(Plant/Current) _____ assets purchased as a group in a single transaction for a lump-sum price are allocated the purchase price based on their relative market values.

plant

_______ assets are assets used in a company's operations that have a useful life of more than one accounting period.

plant

Straight-line depreciation is calculated by taking cost minus (salvage/market) value divided by useful life.

salvage

Straight-line depreciation is calculated by taking cost minus (salvage/market)______ value divided by useful life.

salvage

PT Co. purchased land and an existing building for $200,000. In addition, PT paid real estate commissions of $15,000. PT removed the unwanted building and graded the land for a total cost of $35,000. PT should record the cost of the land at:

$250,000

On June 1, Harding Co. purchased a machine for $14,000 and estimates it will use the machine for five-years with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine's first year (partial) depreciation expense for June 1st through December 31st. Multiple choice question. $1,400 $1,200 $2,400 $2,800 $1,000

On June 1, Harding Co. purchased a machine for $14,000 and estimates it will use the machine for five-years with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine's first year (partial) depreciation expense for June 1st through December 31st.

The cost at which a company records purchases of machinery and equipment should include which of the following? (Check all that apply.) Multiple select question. Purchase price Shipping fees Installation Taxes Operating costs

Purchase price Shipping fees Installation Taxes

Plant assets are recorded at cost, which includes all expenditures necessary to get the asset in place and ready for use. All of the following would be included as part of the cost of a plant asset except: Multiple choice question. damage done when unpacking the plant asset costs to customize the new plant asset cost to purchase the new plant asset costs to modify the new plant asset

damage done when unpacking the plant asset

A company owns an asset that is fully depreciated. The asset is no longer being used in operations and has no market value. The company has decided to ________ the asset by recording an entry to remove it from the balance sheet. Multiple choice question. depreciate take a loss on discard

discard

Fill in the blank question. On January 2, Dice Co. purchases a mixing machine for $25,500. The machine is expected to last four years and have a salvage value of $5,500. Assuming the company uses the straight-line method, depreciation expense should be $

$5000

Straight-line depreciation can be calculated by taking: (cost minus salvage value)/productive life (cost minus salvage value)/useful life (cost plus salvage value)/productive life (cost plus salvage value)/useful life

(cost minus salvage value)/useful life

The factors necessary to compute depreciation include all of the following, except: Multiple choice question. book value. useful life. cost. salvage value.

Book Value

Book value is greater than the selling price Book value is less than the selling price Book value is equal to the selling price Answers:

Book value is greater than the selling price matches Loss on sale of asset Book value is less than the selling price matches Gain on sale of asset Book value is equal to the selling price matches No gain or loss recognized

Which of the following items are plant assets? (Check all that apply.) Multiple select question. Equipment being used in operations Land held for expansion Building being used for operations Equipment with no value

Equipment being used in operations Building being used for operations

Forward Co. discarded a machine that cost $5,000 and was fully depreciated. The entry to record this transaction would include a credit to the _________ account. Multiple choice question. Depreciation Expense - Machinery Machinery Loss on Disposal of Machinery Accumulated Depreciation - Machinery

Machinery

The factors necessary to compute depreciation include all of the following, except: Multiple choice question. cost. useful life. salvage value. book value.

book value.

A company owns an asset that is fully depreciated. The asset is no longer being used in operations and has no market value. The company has decided to ________ the asset by recording an entry to remove it from the balance sheet. Multiple choice question. take a loss on discard depreciate

Discard

Tops Co. purchases equipment for $12,000 and has been using straight-line depreciation, estimating a 5-year life and $500 salvage value. At the beginning of the third year, Tops decides to use the equipment for a total of 6-years with no salvage value. Compute the revised depreciation for the third year.

$1,850

Which of the following items are plant assets? (Check all that apply.) Multiple select question. Building being used for operations Equipment being used in operations Land held for expansion Equipment with no value

Building being used for operations Equipment being used in operations

When a company revises an estimate used to record depreciation expense, the company should revise depreciation by using the formula (_______ - revised salvage value)/revised remaining useful life. Multiple choice question. accumulated depreciation original cost market value book value

book value

Wen Co. purchased a building for $200,000. Wen paid $20,000 in lawyer and title fees. Wen also paid an additional $15,000 to modify the building in order to accommodate his business needs. Wen should record the cost of the building at: Multiple choice question. $200,000 $235,000 $220,000 $215,000

200000 for building 20,000 Lawyer and Title Fees 15,000 modify the building $235,000

Geo Co. purchased a building for $400,000. In addition, Geo paid $35,000 for taxes and lawyer fees. Geo also paid $60,000 to modify the building, changing the layout specifically for Geo's needs. Geo should record the building at $

495000

______ is the process of allocating the cost of a plant asset to expense while it is in use.

depreciation