Accounting 202 Smartbook chapter 10

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

(cost minus salvage value)/useful life

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. $2,400 $1,200 $1,400 $1,000 $2,800

1,400 (14,000-2000)/5 x 7/12=1,400 for a partial year depreciation.

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. Multiple choice question. $2,875 $1,250 $1,850 $2,375

1,850 Reason: (12,000-500)/5=2,300 per year. $2,300 x 2 years = $4,600 depreciation taken. Book value at beginning of year 3 = $12,000-4,600= $7,400/4 = $1,850.

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. $196,500 $195,500 $196,000 $190,000 $195,000

196,500

Daley Co. owns a mineral deposit with an estimated 600,000 tons of available ore. It was purchased for $300,000 and has no salvage value. During the current period, Daley mined and sold 40,000 tons of ore. Depletion expense for the period will be how much? Multiple choice question. $300,000 $20,000 $0.50 $40,000

20,000

Seven Co. owns a coal mine with an estimated 1,000,000 tons of available coal. It was purchased for $300,000 and has $50,000 salvage value. During the current period, Seven mined and sold 200,000 tons of coal. Depletion expense for the period will be how much? Multiple choice question. $30,000 $50,000 $60,000

200,000/1,000,000=.2 -- % used 300,000-50,000=250,000 250,000*.2= 50,000

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. $215,000 $220,000 $200,000 $235,000

235,000

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: Multiple choice question. $250,000 $215,000 $200,000 $235,000

250,000

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 $6,000 $1,500 $3,000

26000-2000=24000 24000/4=6000 per year 6000/12=500 per month 500*2=1,000 2 months

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: Multiple choice question. $330,000. $320,000. $300,000. $350,000.

350000

A company acquires a patent for $20,000 to manufacture and sell an item. The company intends to hold the patent for 5 years. Amortization for the first year will be recorded with a debit to Amortization Expense for $.

4,000

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 $

495,000

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. An asset with book value of $2,000 is sold for $2,000. An asset that cost $5,000 with accumulated depreciation of $3,000 is sold for $1,500. A fully depreciated asset is discarded.

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

When considering the sale of a plant asset, match the following outcomes to the appropriate situations. A. Book value is greater than the selling price. B. Book value is less than the selling price. C. Book value is equal to the selling price

A. Loss on Sale B. Gain on sail C. No gain or loss recognized

______ are expenditures that make a plant asset more efficient or productive, but do not always increase an asset's useful life. Multiple choice question. Revenue expenditures Betterments Extraordinary repairs Ordinary repairs

Betterments

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

Book Value

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. book value accumulated depreciation original cost market value

Book value

Which of the following items are plant assets? (Check all that apply.) Multiple select question. Equipment with a useful life of less than one accounting period. Building used for operations Equipment used in operations Land held for expansion

Building used for operations Equipment used in operations

Select all that apply Determine which of the following expenses are considered revenue expenditures related to a company vehicle. Multiple select question. Dent repair Car wash Installation of special equipment Oil change Engine overhaul

Dent Repair Car wash Oil change

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

Depreciation

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. Installation Taxes Shipping fees Operating costs Purchase price

Installation Taxes Shipping fees Purchase price

______ are nonphysical assets used in operations that give companies long-term rights, or competitive advantages. Multiple choice question. Current assets Natural resource Intangible assets Plant assets

Intangible assets

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 improvements land structures land

Land improvements

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. Equipment for $6,000 Depreciation Expense - Equipment for $1,500 Accumulated Depreciation for $6,000 Loss on Disposal of Equipment for $1,500

Loss on Disposal of Equipment for $1,500

Select all that apply Which of the following asset(s) are NOT considered intangible assets? Multiple select question. Goodwill Mineral deposit Copy machine Copyright Trademark

Mineral deposit Copy machine

To calculate depletion expense, first determine the depletion per unit. Depletion per unit can be calculated by taking (cost Blank______)/total units of capacity. Multiple choice question. Minus operating expenses Plus operating expenses Minus salvage value Plus salvage value

Minus salvage value

Brice Co. purchases land in order to drill oil. This oil field would be classified as a(n) Blank______ on the balance sheet. Multiple choice question. plant asset current asset natural resource intangible asset

Natural resource

______ are assets that are physically consumed when used, such as mineral deposits and oil and gas fields. Multiple choice question. Natural resources Plant assets Intangible assets Current assets

Natural resources

______ are expenditures that keep an asset in good operating condition. They are necessary if an asset is to perform to expectations over its useful life. Multiple choice question. Ordinary repairs Capital repairs Betterments Extraordinary repairs

Ordinary repairs

Select all that apply Which of the following assets are amortized? Multiple select question. Patent Land Copyright Coal mine Building

Patent Copyright

(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

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

Plant or Fixed

Which of the following expenses would not be considered an ordinary repair? Multiple choice question. Lubricating Replacing an engine Cleaning Replacing small parts

Replacing an engine

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

Salvage value Useful life Cost of asset

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? Multiple select question. Shipping charges Repairs necessary for damages incurred during installation Fines incurred for failing to get the correct permits Testing Assembling

Shipping charges Testing Assembling

Copyrights, trademarks, and other intangible assets are expensed over their useful lives through the process of: Multiple choice question. amortization depreciation impairment depletion

amortization

Niren Co. made modifications to a manufacturing machine that increased its productivity by 40%. Niren would classify this expense as a(n): Multiple choice question. extraordinary repair. betterment. ordinary repair. revenue expenditure.

betterment

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. costs to modify the new plant asset cost to purchase the new plant asset costs to customize the new plant asset damage done when unpacking the plant asset

damage done when unpacking the plant asset

The process of allocating the cost of a natural resource to a period when it is consumed requires a debit entry to the ----account.

depletion expense

The process of allocating the cost of a plant asset to expense while it is in use is called (depreciation/salvage) _

depreciation

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 Blank______ the asset by recording an entry to remove it from the balance sheet. Multiple choice question. depreciate take a loss on discard

discard

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

discarded

Land (improvements/additions) that are additions to land and have limited useful lives, such as walkways and fences.

improvements

The purchase of a group of plant assets for one price is called a Blank______ purchase. Multiple choice question. fixed-rate betterment extraordinary lump-sum

lump-sum

A Blank______ is an exclusive right granted to its owner to manufacture and sell an item or use a process for 20 years. Multiple choice question. leasehold patent goodwill copyright

patent

(Revenue/Capital) expenditures are additional costs of plant assets that do not materially increase the asset's life or capabilities.

revenue

Total asset turnover is computed as net----- /average total assets.

sales