Chapter 7- Long Term Assets
Otto Inc. retires old equipment with a book value of $2,400. Otto should
recognize a loss of $2,400
The journal entry to retire old equipment that is not fully depreciated includes a:
debit to accumulated depreciation credit to equipment debit to loss
When selling a fixed asset, the seller recognizes a gain or loss for the difference between the amount received and the ______ value of the asset sold.
Book
The original cost of the asset less the accumulated depreciation is the
Book Value
The original cost of an asset minus accumulated depreciation is
book value
Depreciation
Allocation of the cost of a tangible fixed asset
Amortization
Allocation of the cost of an intangible asset
Depletion
Allocation of the cost of natural resources
The allocation of the cost of an intangible asset is referred to as
Amortization
The purchase price and all costs to bring an asset to its desired condition and location for use should be ______.
Capitalized
Pearce Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $120,000, and its accumulated depreciation at the date of exchange was $40,000. The new equipment received had a fair value of $50,000 and a book value of $32,000. The journal entry to record this exchange will include which of the following entries?
Debit equipment $50,000 Debit accumulated depreciation $40,000 Debit loss on exchange $30,000 Credit equipment $120,000
Which of the following are commonly used depreciation methods?
Declining-balance Activity-based Straight-line
Straight-line, declining-balance, and activity-based refer to methods commonly used to
Depreciate property, plant, and equipment.
The allocation of the cost of a tangible fixed asset is referred to as
Depreciation
Long-term tangible assets include
Equipment, Land, Buildinngs
An asset that has no physical substance is called
Intangible Asset
The estimated use the company expects to obtain from an asset before disposing of it is referred to as the
useful life
value is the amount the company expects to receive for the asset at the end of its service life.
Residual
The term used to describe the amount the company expects to receive for an asset at the end of its service life is
Residual Value
Wall Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $100,000, and its accumulated depreciation at the date of exchange was $60,000. The new asset received had a fair value of $80,000 and a book value of $65,000. The journal entry to record this exchange will include which of the following entries?
Credit equipment $100,000 Debit equipment $80,000 Debit accumulated depreciation $60,000 Credit gain on exchange of asset $40,000
Krasel Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $90,000, and its accumulated depreciation at the date of exchange was $70,000. The new asset received had a fair value of $50,000 and a book value of $45,000. The journal entry to record this exchange will include which of the following entries?
Credit equipment $90,000 Debit accumulated depreciation $70,000 Debit equipment $50,000 Credit gain on exchange of asset $30,000
Which statement is true about the straight-line method of depreciation?
It allocates an equal amount of depreciation to each year the asset is used.
Which of the following are long-term tangible assets?
Property and Equipment
The depreciation method that allocates an equal amount of the depreciable base to each year of the asset's service life is the
Straight-Line Method
The initial cost of property, plant, and equipment includes the purchase price and all expenditures necessary to bring the asset to its desired condition and location for use.
True
A retirement or abandonment of an asset is different from a sale of an asset because
a loss must be recognized for the remaining book value. no cash is received.
The gain or loss on disposal of an asset is calculated as:
amount received less the book value of asset sold
When an asset is no longer useful, but cannot be sold, it is called an asset
retirement
The depreciable cost is
the cost of the asset minus the residual value.
The service life or useful life of an asset is
the estimated use that the company expects to obtain from the asset before disposing of it.
Cheng Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $90,000, and its accumulated depreciation at the date of exchange was $40,000. The new equipment received had a fair value of $40,000 and a book value of $35,000. The journal entry to record this exchange will include which of the following entries?
Credit equipment $90,000 Debit equipment $40,000 Debit loss on exchange $10,000 Debit accumulated depreciation $40,000
