chapter 9

Which cost is not recoded as part of the cost of land?

Building permits

What would be the journal entry to record $3,000 in depletion expense for the year?

account depletion expense-of resources debit 3000 accumulated depletion-of resources credit 3,000

What would be the journal entry to record $3,000 in depletion expense for the year?

account depletion expense-of resources debit 3,000 accumulated depletion-of resources credit 3,000

commercial substance.

an exchange where future cash flows change as a result of the transaction

Which of the following is not an intangible asset?

cash

A piece of equipment costs $100,000 and has $5,000 of depreciation expense each year using the straight-line method. What is the book value at the end of the third year?

After 3 years, accumulated depreciation would be ($5,000 * 3 years) = $15,000. Book value is calculated by taking the cost of $100,000 - $15,000 accumulated depreciation = $85,000.

A piece of equipment costs $300,000 and has $60,000 of depreciation expense each year using the straight-line method. What is the book value at the end of the third year?

After 3 years, accumulated depreciation would be ($60,000 * 3 years) = $180,000. Book value is calculated by taking the cost of $300,000 - $180,000 accumulated depreciation = $120,000.

Jones Corporation purchases a piece of land for $300,000. Jones Corp. paid $3,000 in brokerage commissions, $10,000 to clear and remove an unwanted building, $5,000 for building permits to construct a new building, $500,000 to construct a new building, and $5,000 in delinquent property taxes. What is the amount to be capitalized (debited) to the Building account?

Capitalized (debited) to the Building account would be the $5,000 for building permits to construct a new building and the $500,000 to construct a new building for a total of $505,000. The other items are capitalized to Land.

Top Line Electronics has a piece of machinery that costs $600,000 and is expected to have a useful life of 4 years. Residual value is expected to be $100,000. Using the double-declining-balance method, what is depreciation expense for the first year?

Double-declining-balance rate is 2 * (1 / 4 years) = 50%. To calculate depreciation expense for the first year take the (cost of $600,000 - $0 accumulated depreciation) * .50 rate = $300,000. Residual value is only taken out of the last year in double-declining-balance method.

base Electronics has a piece of machinery that costs $400,000 and is expected to have a useful life of 5 years or 100,000 hours. Residual value is expected to be $50,000. Using the units-of-production method, what is depreciation expense for the first year assuming it was used 16,000 hours?

(400,000-50,000) / 100,000 = 3.50 16,000 * 3.50 = 56,00

An oil well costs $500,000 and is estimated to hold 100,000 barrels of oil. There is no residual value. If 15,000 barrels are extracted and sold during the year, what is the depletion expense?

75,000

Mason Corporation purchases a piece of land for $200,000. Mason Corporation paid $4,000 in brokerage commissions, $12,000 to clear and remove an unwanted building, $4,000 for building permits to construct a new building, $600,000 to construct a new building, and $2,000 in delinquent property taxes. What is the amount to be capitalized (debited) to the Land account from this purchase?

Amounts to be capitalized to Land would be the purchase price of $200,000, $4,000 in brokerage commissions, $12,000 to clear and remove an unwanted building, and $2,000 in delinquent property taxes for a total of $218,000.

Jones Corporation purchases a piece of land for $300,000. Jones Corp. paid $3,000 in brokerage commissions, $10,000 to clear and remove an unwanted building, $5,000 for building permits to construct a new building, $500,000 to construct a new building, and $5,000 in delinquent property taxes. What is the amount to be capitalized (debited) to the Land account from this purchase?

Amounts to be capitalized to Land would be the purchase price of $300,000, $3,000 in brokerage commissions, $10,000 to clear and remove an unwanted building, and $5,000 in delinquent property taxes for a total of $318,000.

Which cost is not recorded as part of the cost of a new building?

Cost of clearing the land and removing an unwanted building

The excess of the cost of an acquired company over the sum of the market value of its net assets is

Goodwill

Which cost is not recoded as part of the cost of machinery and equipment?

Maintenance on the machine after it is up and running

The cost of land includes the following amounts paid by the​ purchaser:

Purchase price times Brokerage commission times Survey and legal fees times Delinquent property taxes times Taxes assessed to transfer the ownership​ (title) on the land times Cost of clearing the land and removing unwanted buildings

Which depreciation method always gives you the same amount of depreciation expense each year?

Straight-line

Base Electronics has a piece of machinery that costs $400,000 and is expected to have a useful life of 5 years. Residual value is expected to be $50,000. Using the straight-line method, what is depreciation expense for the first year?

Straight-line depreciation allocates an equal amount of depreciation to each year and is calculated by dividing the cost less residual value by the useful life. In this problem, annual depreciation is ($400,000 - $50,000) / 5 years = $70,000.

Carson Company has a piece of machinery that costs $500,000 and is expected to have a useful life of 4 years. Residual value is expected to be $50,000. Using the straight-line method, what is depreciation expense for the first year?

Straight-line depreciation allocates an equal amount of depreciation to each year and is calculated by dividing the cost less residual value by the useful life. In this problem, annual depreciation is ($500,000 - $50,000) / 4 years = $112,500.

Lake Company reported beginning and ending Total Assets of $25,000 and $35,000 respectively. The Net Sales for the year were $15,000. What is the asset turnover ratio?

The asset turnover ratio is calculated by dividing net sales by average total assets, or 15,000 / ((25,000 + 35,000)/2) = 0.50.

Base Electronics has a piece of machinery that costs $400,000 and is expected to have a useful life of 5 years. Residual value is expected to be $50,000. Using the double-declining-balance method, what is depreciation expense for the first year?

The double-declining-balance method multiplies the asset's book value (cost less accumulated depreciation) times twice the straight-line rate. Double-declining-balance rate is 2 * (1 / 5 years) = 40%. To calculate depreciation expense for the first year take the (cost of $400,000 - $0 accumulated depreciation) * .40 rate = $160,000. Residual value is only taken out of the last year in double-declining-balance method.

Freedom Corporation reported beginning and ending total assets of $ 20 , 000 and $ 28, 000​, respectively. Its net sales for the year were $ 22 , 800. What was Freedom​'s asset turnover​ ratio?

[20,000+28,000]/2= 24000 net sales/average total assets= asset turnover ratio 22,800/24000=0.95

Ayer Furniture purchased​ land, paying $ 90,000 cash and signing a $ 350, 000 note payable. In​ addition, Ayer paid delinquent property tax of $ 5 comma 000​, title insurance costing $ 4 , 500​, and $ 9 comma 000 to level the land and remove an unwanted building. The company then constructed an office building at a cost of $ 500 , 000. It also paid $ 52 , 000 for a fence around the​ property, $ 18 ,000 for a sign near the​ entrance, and $ 10 , 000 for special lighting of the grounds.

​Let's calculate the cost of the land. The purchase price of the land is the sum of the amount paid in cash and the amount financed with a note payable​ (90,000+350,000)=440000 purchase price of land $ 440000 add related cost: property taxes$ 18,000 title insurance4,500 removal of building. total cost of land