Ch. 9 Exercise- study 8

The term capitalize means to record in an asset account. T/F

True

Using the double-declining balance method of depreciation, the depreciation expense for an asset with an 8 year estimated useful life would be the book value of the asset at the beginning of the year x 25%. T/F

True

Bruno Company purchased equipment on January 1, 2015 at a total invoice cost of $280,000; additional costs of $5,000 for freight and $25,000 for installation were incurred. The equipment has an estimated salvage value of $10,000 and an estimated useful life of five years. The amount of accumulated depreciation at December 31, 2016 if the straight-line method of deprecation is used is:

$124,000

Nietzsche Company purchased a machine on January 1, 2015 for $350,000. the machine has an estimated useful life of five years and a salvage value of $50,000. The machine is being depreciated using the double-declining balance method. The book value at December 31, 2016 (after depreciation expense for the year has been recorded) is:

$126,000

Plato Company acquired land with a purchase price of $150,000. Plato Company also paid an attorney's fee of $6,000, demolition and removal costs of an old building $4,000, and grading and filling the land $3,000. The land should be recorded at

$163,000

A company purchased factory equipment on April 1, 2006 for $48,000. It is estimated that the equipment will have a $6,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2006 i

$3,150 This problem involves depreciation for a partial year. Depreciation for the entire year would be $4,200. This is calculated as (48,000-6,000)/10. However, the asset was only used for 9 months during 2006 (all of April through the end of December). Therefore, the depreciation expense for 2006 is $3,150 (4200 x 9/12).

Renn Company acquires land for $56,000 cash. Additional costs are as follows: Removal of shed $ 300 Filling and grading 1,500 Broker commission 1,130 Paving of parking lot 10,000 Closing costs 560 Renn received $120 cash for the lumber which was salvaged from the removal of the shed. Renn will record the acquisition cost of the land as

$59,370

A company purchased office equipment for $20,000 and estimated a salvage value of $4,000 at the end of its 5-year useful life. The constant percentage to be applied against book value each year if the double-declining-balance method is used is

40%

Which of the following would not be classified as a plant asset? A. Supplies B. Land Improvements C. Buildings D. Land

A

Recording depreciation each period is necessary in accordance with the A. cost principle B. going concern principle C. asset valuation principle D. matching principle

D

Recording depreciation each period is necessary in accordance with the A. going concern principle B. asset valuation principle C. cost principle D. matching principle

D

The balance in the Accumulated Depreciation account represents the A.amount to be deducted from the cost of the plant asset to arrive at its fair market value B. cash fund to be used to replace plant assets C. amount charged to expense in the current period D.amount charged to expense since the acquisition of the plant asset

D

All plant assets should be depreciated. T/F

False

The carrying value of a plant asset always equals its fair market value. T/F

False

The cost of driveways and parking lots is debited to Land. T/F

False

The cost of tearing down an old building on a newly purchased lot to make the site suitable for a new building should be debited to Buildings. T/F

False

Using the double-declining balance method of depreciation, very little depreciation expense will be taken in the early years of the asset's life and a lot of depreciation expense will be taken in the later years of the asset's life. T/F

False

Using the double-declining balance method of depreciation, the depreciation expense for an asset with an 8 year estimated useful life would be the book value of the asset at the beginning of the year x 25%.

T/F