Acct Exam 3

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.

$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.

$1,400

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

A delivery van that cost $45,000 with accumulated depreciation of $15,000 is sold for $20,000. How much gain or loss will be recognized on this sale?

$10,000 loss

Teshin Co. purchases a piece of land with several land improvements for $180,000. The land appraises at $120,000 and the land improvements appraise at $80,000. The land should be recorded at what cost?

$108,000

Arc Co. purchased a piece of equipment for $25,000. At the end of the year, the book value of the equipment is $12,000. The salvage value is 0. How much is accumulated depreciation, using the straight-line method, at the end of the period?

$13,000

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:

$196,500

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.

$2,000

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?

$20,000

Bina Co. purchased a machine on January 1st for $15,000 and estimates it will use the machine for three years with a $3,000 salvage value. Bina estimates that they will produce 1,500 units during year one, 1,000 units during year two, and 1,250 units during year three. Using the units-of-production method, compute the machine's second year depreciation expense.

$3,200

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:

$350,000

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

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 $______

$5,000

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?

$50,000

Cen Co. purchases land and a building for $130,000. The land is appraised at $100,000 and the building at $150,000. Allocating the cost based on market values, the land should be recorded at what amount?

$52,000

At the beginning of the year, Jobs Co. owned one piece of office equipment, a copier. The copier was purchased two years ago for $12,000. At the beginning of the year, the balance in accumulated depreciation was $4,000. Jobs uses straight-line depreciation of $2,000 per year with a zero salvage value. How much is accumulated depreciation at the end of the year?

$6,000

Straight-line depreciation can be calculated by taking:

(cost - salvage value)/useful life

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

Ella Co. owns a mineral deposit and recognizes $15,000 of depletion expense during the period. This entry will be recorded with a credit to:

Accumulated Depletion - Mineral Deposit

_________ are expenditures that make a plant asset more efficient or productive, but do not always increase an asset's useful life.

Betterments

Which of the following items are plant assets? Equipment with no value Land held for expansion Building being used for operations Equipment being used in operations

Building being used for operations Equipment being used in operations

factors determine depreciation?

Cost of asset Salvage value Useful life

The cost of a plant asset includes

Cost to prepare it for use Purchase price

A company sells a machine that cost $7,000 for $500 cash. The machine had $6,500 accumulated depreciation. The entry to record this transaction will include which of the following entries?

Credit to Machinery for $7,000. Debit to Cash for $500. Debit to Accumulated Depreciation - Machinery for $6,500.

Trio Co. reported that maintenance and normal repair costs are expensed as incurred. If Trio's current year machinery and equipment repair costs are $8,200, which accounts would be impacted to complete the journal entry?

Debit Repairs expense. Credit Cash.

A patent was purchased for $20,000 and expected to be used for the 20-year life with no salvage value. The entry to expense the patent during the second year of life will include which of the following entries? (Check all that apply.)

Debit to Amortization Expense $1,000. Credit to Accumulated Amortization $1,000.

A patent was purchased for $15,000 and expected to be used for the 10-year life with no salvage value. The entry to expense the patent during the second year of life will include which of the following entries?

Debit to Amortization Expense $1,500. Credit to Accumulated Amortization $1,500.

Determine which expenses are considered revenue expenditures related to a company vehicle

Dent repair Car wash Oil change

items related to depreciating equipment would be found on a company's income statement?

Depreciation Expense - Equipment

Diamond Co. paid cash to overhaul a forklift, which extended the life of the forklift for an additional four years. The entry to record this purchase would include a debit to the _______ account.

Equipment

Quick Catering Co. paid for a refrigeration system to be added to their delivery van to keep the food cooled during deliveries. To record this expense, Quick would debit the ________ account.

Equipment

Sangmoon Co. sells equipment for $1,000 cash. The equipment cost Sangmoon $6,500 and has accumulated depreciation of $2,000 at the time of sale. Sangmoon will record the sale with a credit to which account and for how much?

Equipment for $6,500.

___________ are expenditures that extend the asset's useful life beyond its original estimate.

Extraordinary repairs

ATZ Co. sells equipment that cost $9,000 with current accumulated depreciation of $8,000 for $2,000 cash. To record this transaction, ATZ will credit which accounts?

Gain on Sale of Equipment Equipment

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

Improvements

The cost at which a company records purchases of machinery and equipment should include

Installation Shipping fees Purchase price Taxes

_______ are nonphysical assets used in operations that give companies long-term rights, or competitive advantages.

Intangible assets

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?

Loss on Disposal of Equipment for $1,500

Sanson Co. sells equipment for $1,000 cash. The equipment cost Sanson $6,500 and has accumulated depreciation of $2,000 at the time of sale. Sanson will record the sale with a debit to which account and for how much?

Loss on Sale of Equipment for $3,500.

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.

Machinery

To calculate depletion expense, first determine the depletion per unit. Depletion per unit can be calculated by taking (cost ______)/total units of capacity.

Minus salvage value

_______ 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.

Ordinary repairs

Determine expenses related to a building would be classified as a capital expenditure

Room addition New air conditioning system

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 costs?

Testing Assembling Shipping charges

When an asset is sold for an amount that is above the asset's current book value, the company should record?

a gain on sale of equipment.

Book value can be calculated by taking an asset's acquisition costs less its ______ _______.

accumulated/depreciation

Niren Co. made modifications to a manufacturing machine that increased its productivity by 40%. Niren would classify this expense as a(n):

betterment.

The asset's acquisition costs less its accumulated depreciation is called:

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.

book value

__________ expenditures are additional costs of plant assets that provide benefits extending beyond the current period, such as a plant expansion, or major machine overhaul.

capital

Accumulated depreciation is a __________ asset account (one that is linked with the plant asset account, but has an opposite normal balance) and is reported on the balance sheet.

contra

Accumulated depletion is considered to be a ________ and is recorded on the _________.

contra asset/balance sheet

The exclusive right to publish or sell a musical, literary, or artistic work during the life of the creator plus 70 years is called a__________.

copyright

Privo Co. purchases a machine that cost $15,000. Privo estimates a 5-year life with no salvage value. The first three years of depreciation expense are $6,000; $3,600; and $2,160, respectively. Based on this information, Privo is using the ________ depreciation method.

declining-balance

delete

delete

An oil company recognizes the cost of discovering and operating oil wells by recording ______ expense for each unit of oil used.

depletion

_______ is the process of allocating the cost of a natural resource to the period when it is consumed.

depletion

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

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

depreceation

A plant asset is __________ when it is no longer useful to the company, and it has no market value.

discarded

Sioux Co. replaced the roof on its existing building, therefore increasing the building's life by 10 years. The cost of the roof is considered a(n):

extraordinary repair

True or false: The cost of plant assets should include all of the normal and reasonable expenditures necessary to get the asset in place and ready for its intended use, including repairs to damages incurred after installation

false

_____ is measured as the excess of the cost of an acquired entity over the value of the individual assets and liabilities.

goodwill

Intangible assets that continue indefinitely into the future and are not amortized. The values of these assets are tested annually for ________.

impairment

The inability of a company's plant assets to meet its demands is called:

inadequacy

Amortization expense is recorded on which financial statement?

income statement

Depreciation expense is reported as a decrease in which financial statements?

income statement

If an intangible asset has an ________ life, it is recorded as an intangible asset, but is not amortized.

indefinite

If an intangible asset has a(n)___ is not amortized.

indefinite life

Assets that increase the benefits of land, have a limited useful life, such as parking lots and lighting systems, are called:

land improvements

T. Chung Co. sold a computer for $500 cash. The computer cost $3,000 and had accumulated depreciation of $2,200 at the time of the sale. Chung will record the sale with an entry to the _______ on Disposal of Equipment account in the amount of $_______.

loss/300

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

lump-sum

To calculate depletion expense, first determine the depletion per unit. Depletion per unit can be calculated by taking (cost ______)/total units of capacity.

minus salvage value

Brice Co. purchases land in order to drill oil. This oil field would be classified as a(n) _______ on the balance sheet.

natural resource

______ are assets that are physically consumed when used, such as mineral deposits and oil and gas fields.

natural resources

The term ______ refers to a plant asset that is in the process of becoming outdated and no longer used.

obsolescence

A _______ is an exclusive right granted to its owner to manufacture and sell an item or use a process for 20 years.

patent

The _______ life (also called service life) is the length of time the asset is productively used in a company's operations.

useful

Accumulated depletion is a contra asset account, and is therefore reported on the _______ ________.

balance/sheet

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

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

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 ________ the asset by recording an entry to remove it from the balance sheet.

discard

True or false: The cost of a plant asset consists of all necessary and reasonable expenditures to acquire it and prepare it for its intended use.

true

To calculate depletion expense in a period, a company should multiply the depletion per unit by:

units extracted and sold in the period

Grand Co. owns one copier that was purchased for $10,000 three years ago. The depreciation expense taken on the copier each year has been $2,700; $1,800; and $2,200, based on the number of copies that have been made on the copier. Based on this information, the company uses the ________ depreciation method.

units-of-production

If an intangible asset has a limited life, its cost is systematically allocated to expense over its useful life through the process of:

amoritzation

Wyatt Co. purchased a popular symbol that doubled its sales in the first year. The cost of this symbol is an asset called a:

trademark

Copyrights, trademarks, and other intangible assets are expensed over their useful lives through the process of:

amorization

Accumulated depreciation is recorded on which of the following financial statements?

balance sheet

Bilos Co. purchased a patent on a newly developed technology. They will recognize the cost of this patent:

over the asset's life using amortization expense

________ 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

__________ expenditures are additional costs of plant assets that do not materially increase the asset's life or capabilities.

revenue

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

salvage

______ value, also called residual value or scrap value, is an estimate of the asset's value at the end of its useful life.

salvage