ch 9 textbook questions

additions to plant assets are

capital expenditures

Depreciation is a process of

cost allocation

research and development costs

cost incurred by a company that often lead to patents or new products. these costs must be expenses as incurred

When there is a change in estimated depreciation

current and future years depreciation should be revised

copyrights

An exclusive right granted by the federal government allowing the owner to reproduce and sell an artistic or published work.

Jefferson Company purchased a piece of equipment on January 1, 2014. The equipment cost $60,000 and had an estimated life of 8 years and a salvage value of $8,000. What was the depreciation expense for the asset for 2015 under the double-declining-balance method?

11,250 the depreciation rate would be 25% or (1/8 x 2). for 2019, annual depreciation expensee is $15,000 (60,000 book value x 25%). the annual depreciation is 11,250 (60,000 - 15,000)

Able Towing Company purchased a tow truck for $60,000 on January 1, 2012. It was originally depreciated on a straight-line basis over 10 years with an estimated salvage value of $12,000. On December 31, 2014, before adjusting entries had been made, the company decided to change the remaining estimated life to 4 more years as of January 1, 2014, and the salvage value was adjusted to $2,000. How much is depreciation expense for 2014?

12,100 calculate accumulated depreciation from jan 1 2017 to dec 31 2018 which is 9,600 [(60,000 - 12,000)/10 year] x 2 years). calculate the revised depreciable cost, which is 48,400 (60,000 - 9600 - 2000). thus the depreciation expense for 2019 is 12,100 (48,400/4)

Micah Bartlett Company purchased equipment on January 1, 2014, at a total invoice cost of $400,000. The equipment has an estimated salvage value of $10,000 and an estimated useful life of 5 years. The amount of accumulated depreciation at December 31, 2015, if the straight-line method of depreciation is used, is

156,000 annual depreciation = (400,000 - 10,000)/5 = 78,000. 78,000+78,000 = 156,000

which of the following statements in false

research and development costs are expenses when incurred, except when the research and development expenditures result in a successful patent

depletion

the allocation of the cost of a natural resource to expense in a rational a systematic manner

reporting only totals of major classes of assets in the balance sheet is appropriate. additional details can be shown in the notes to the financial statements

true

Ann Torbert purchased a truck for $11,000 on January 1, 2014. The truck will have an estimated salvage value of $1,000 at the end of 5 years. Using the units-of-activity method, the balance in accumulated depreciation at December 31, 2015, can be computed by the following formula:

(10,000 / total estimated activity) x units of activity for 2018 and 2019

Lake Coffee Company reported net sales of $180,000, net income of $54,000, beginning total assets of $200,000, and ending total assets of $300,000. What was the company's asset turnover?

.72 net sales (180,000)/average total assets [(200,000 + 300000)/2] = .72

Bennie Razor Company has decided to sell one of its old manufacturing machines on June 30, 2017. The machine was purchased for $80,000 on January 1, 2013, and was depreciated on a straight-line basis over a 10-year life assuming no salvage value. If the machine was sold for $26,000, how much is the gain or loss to be recorded at the time of the sale?

18,000 the acc dec as of june 30 2019 is 36,000 (80,000/10 x 4.5 years) the cost of machine less acc dec is 44,000 (80,000 - 36000). the loss recorded at the time of sale is 18,000 (26000 - 44000)

Erin Danielle Company purchased equipment and incurred the following costs: Cash price -$24,000 Sales taxes- $1,200 Insurance during transit- $200 Installation and testing-$400 Total costs-$25,800 What amount should be recorded as the cost of the equipment?

25,800

Martha Beyerlein Company incurred $150,000 of research and development costs in its laboratory to develop a patent granted on January 2, 2015. On July 31, 2015, Beyerlein paid $35,000 for legal fees in a successful defense of the patent. The total amount debited to Patents through July 31, 2015, should be

35,000 because the 150,000 was spent developing the patent rather than buying it from another firm, it is debited to R&D expense

Schopenhauer Company exchanged an old machine, with a book value of $39,000 and a fair value of $35,000, and paid $10,000 cash for a similar new machine. The transaction has commercial substance. At what amount should the machine acquired in the exchange be recorded on Schopenhauer's books?

45,000 when an exchange has commercial substance, the debit to the new asset is equal to the fair value of the old set plus the cash paid (35,000 + 10,000)

intangible assets

Rights, privileges, and competitive advantages that result from the ownership of long-lived assets that do not possess physical substance.

franchises

a right to sell certain products or services or to use certain trademarks or trade names within a designated geographic area

in exchanges of assets in which the exchange has commercial substance

both gains and losses are recognized immediately

Maggie Sharrer Company expects to extract 20 million tons of coal from a mine that cost $12 million. If no salvage value is expected, and 2 million tons are mined and sold in the first year, the entry to record depletion will include a

debit to inventory of 1,200,00 (12 mil/20 mil ton - .60 per ton) 2 min tons x .60 = 1,200,00