Q&A Hero

Q: Goodwill is the amount by which a company's value exceeds the value of its individual assets and liabilities.

Q: Intangible assets are certain nonphysical assets used in operations that confer on their owners long-term rights, privileges, or competitive advantage.

Q: An ore deposit costing $800,000 is expected to produce 1,600,000 tons of ore. A total of 70,000 tons are mined and sold in the current year. The depletion expense for the current year is $35,000.

Q: When the usefulness of plant assets used to extract natural resources is directly related to the depletion of a natural resource, their costs are depreciated using the units-of-production method of depreciation, as long as the assets will not be moved to and used at another site when extraction of the natural resources is complete.

Q: Natural resources are reported on the balance sheet at cost plus accumulated depletion.

Q: Amortization is the process of allocating the cost of natural resources to periods when they are consumed.

Q: Natural resources are assets that include standing timber, mineral deposits, oil wells, and gas fields.

Q: Gain or loss on the disposal of an asset is determined by comparing "value given" (book value) to "value received."

Q: If an asset is sold above its book value, the selling company records a loss.

Q: The cost principle requires that an asset be recorded at the cash or cash equivalent amount that was given in exchange for it.

Q: Treating capital expenditures of a small dollar amount as revenue expenditures is likely to mislead the users of financial statements.

Q: Extraordinary repairs are expenditures extending the asset's useful life beyond its original estimate and are capital expenditures because they benefit future periods.

Q: Ordinary repairs are expenditures that keep assets in normal, good operating condition.

Q: Revenue expenditures are additional costs of plant assets that materially increase the assets' life or productive capabilities.

Q: A company purchased a plant asset for $45,000. The asset has an estimated salvage value of $6,000 and an estimated useful life of 10 years. The annual depreciation expense using the straight-line method is equal to $3,900 per year.

Q: The units-of-production method of depreciation charges a varying amount of expense for each period of an asset's useful life depending on its usage.

Q: When a company constructs a building, the cost of the building includes materials and labor, design fees, building permits, and insurance during construction.

Q: The purchase of a property that included land, building, and improvements is called a lump-sum purchase.

Q: An assets cost includes all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use.

Q: Coors reported net sales of $2,463 million and average total assets of $1,546 million. Its total asset turnover is equal to 1.59.

Q: Decision makers and other users of financial statements are especially interested in evaluating a company's ability to use its assets in generating sales.

Q: Most companies use accelerated depreciation for tax purposes as it reduces taxable income due to higher depreciation expense in the early years of an asset's life.

Q: The total depreciation expense over an asset's useful life will be identical across all methods of depreciation.

Q: The going-concern principle supports the reporting of plant assets at book value rather than market value.

Q: Revising an estimate of the useful life or salvage value of a plant asset is referred to as a change in accounting estimate and is reflected in the past, current, and future financial statements.

Q: When an asset is purchased (or disposed of) at any time other than the beginning or the end of an accounting period, depreciation is recorded for part of a year so that the year of purchase or the year of disposal is charged with its share of the asset's depreciation.

Q: Accumulated depreciation represents funds set aside to buy new assets when the assets currently owned are replaced.

Q: A plant asset's useful life might not be the same as its productive life.

Q: Depreciation measures the actual decline in market value of an asset.

Q: Salvage value is an estimate of an asset's value at the end of its benefit period.

Q: Depreciation is the process of allocating the cost of a plant asset to an expense account in the accounting periods benefiting from its use.

Q: Plant assets are used in everyday operations of the business and have useful lives that extend over more than one accounting period.

Q: Plant assets are assets that are held for sale.

Q: ______________ is the process of systematically allocating the cost of an intangible asset to expense over its estimated useful life.

Q: The process of allocating the cost of a natural resource to the period when it is consumed is called _____________________.

Q: The three usual means for disposal of an asset are: _________________________________________________________.

Q: _________________________ are capital expenditures that make a plant asset more productive; they often involve adding a component to an asset or replacing one of its old components with a better one and do not always increase an asset's life.

Q: ___________________ are additional costs of plant assets that do not materially increase the asset's life or productive capabilities.

Q: _______________________ are expenditures that extend an asset's useful life beyond its original estimate.

Q: _____________________ depreciation uses a depreciation rate that is a multiple of the straight-line rate and applies it to an asset's beginning-of-period book value.

Q: ______________________ depreciation charges a varying amount to expense for each period of an asset's useful life depending on its usage.

Q: _______________________ depreciation recognizes equal amounts of annual depreciation over the life of an asset.

Q: Revising estimates of the useful life or salvage value of a plant asset is referred to as a ____________________________________________.

Q: The _____________________ principle requires that companies report the amount of accumulated depreciation on plant assets as well as the depreciation methods used to determine the annual depreciation expense.

Q: _____________________ is an estimate of an asset's value at the end of its useful life.

Q: The three main factors in computing depreciation are: (1) ____________________, (2) ____________________, (3) ___________________.

Q: A company traded an old forklift for a new forklift, receiving a $10,500 trade-in allowance and paying the remaining $37,200 in cash. The old forklift cost $39,000 and straight-line accumulated depreciation of $27,200 had been recorded as of the exchange date under the assumption it would last five years and have a $5,000 salvage value. a. What was the book value of the old forklift on the date of the exchange? b. What amount of gain or loss (indicate which) should be recognized in recording the exchange? c. What amount should be recorded as the cost of the new forklift?

Q: On April 1 of the current year, a company traded an old machine that originally cost $32,000 and that had accumulated depreciation of $24,000 for a similar new machine that had a cash price of $40,000. a. Give the entry to record the exchange under the assumption that a $5,000 trade-in allowance was received and the balance of $35,000 was paid in cash. b. Give the entry to record the exchange under the assumption that instead of a $5,000 trade-in allowance, a $12,500 trade-in allowance was received and the balance of $27,500 was paid in cash.

Q: A company purchased office equipment for $4,300 by trading in old equipment with a cost of $2,000 and that had accumulated depreciation of $1,900 as of the exchange date. The company received a $75 trade-in allowance for the old equipment with the balance of $4,225 paid in cash. Prepare the journal entry to record the exchange.

Q: During the current year, a company acquired a new computer with a cash price of $12,800 by exchanging an old one on which the company received a $1,500 trade-in allowance (with the balance of $11,300 paid in cash). The old computer cost $9,000 and its accumulated depreciation was $5,500 as of the exchange date. Prepare the journal entry to record the exchange.

Q: A company exchanged an old truck for a newer model. The old truck account had a cost of $76,000 and accumulated depreciation of $65,000 as of the exchange date. The new truck had a cash price of $84,000, but the company was given a $15,000 trade-in allowance and the balance of $69,000 was paid in cash. Prepare the journal entry to record the exchange.

Q: A company exchanged its used machine for a new machine. The old machine cost $70,000 and the new one had a cash price of $95,000. The company had taken $60,000 depreciation on the old machine and was allowed a $2,500 trade-in allowance and the balance of $92,500 was paid in cash. What gain or loss should be recorded on the exchange?

Q: The original cost of a machine was $60,000. After $45,000 of depreciation was recorded, the machine was traded in on a new machine of like purpose priced at $75,000. A $10,500 trade-in allowance was received on the old machine and the balance of $64,500 was paid in cash. Prepare the general journal entry to record this trade-in.

Q: On January 2 of the current year, a company purchased a patent for $35,000 with a useful life of 10 years. Prepare the journal entry to amortize the patent at the end of the first year.

Q: A company purchased mining property that containing 15,000,000 tons of ore for $4,875,000. In 2012, the company mined and sold 789,000 tons of ore and in 2013, it mined and sold 1,235,000. Calculate the depletion expense for 2012 and 2013.

Q: A company purchased mining property for $1,560,000. The property was estimated to contain 13,000,000 tons of ore. In the current year, the company removed and sold 247,000 tons of ore. Calculate the depletion expense for the current year.

Q: Mason Company sold a piece of equipment for $25,000 cash on December 31 after recording the annual depreciation on the asset. The equipment had an original cost of $92,500 and accumulated depreciation of $60,000. Prepare the general journal entry to record the sale of this asset.

Q: On April 1 of the current year, a company disposed of an automobile that had cost $20,000. The auto had a salvage value of $2,000 and a useful life of five years. The accounting records showed accumulated depreciation for this automobile of $8,100 as of April 1 of the current year. The asset was discarded after an accident occurred and $10,500 cash was received from an insurance claim. Prepare the journal entry to record the disposal of the automobile.

Q: On April 1, 2013, a company discarded a computer that cost $15,000 and that had a useful life of four years and a salvage value of $1,000. Using straight-line depreciation, the accumulated depreciation as of December 31, 2012, was $10,700. a. Prepare the journal entry to record depreciation up to the date of disposal of the computer b. Prepare the journal entry to record the disposal of the computer.

Q: A company had a building destroyed by fire. The building originally cost $650,000 and its accumulated depreciation as of the date of the fire was $300,000. The company received $400,000 cash from an insurance policy that covered the building and will use that money to help rebuild. Prepare the single journal entry to record the destruction of the building and the receipt of cash from the insurance company.

Q: A company sold for $40,000 cash a machine that originally cost $90,000. The accumulated depreciation on this machine was $47,000 at the time of the sale. What was the company's gain or loss on this sale?

Q: On January 1, a company purchased a machine for $75,000 that had a six-year useful life and a salvage value of $6,000. After three years of straight-line depreciation, on January 1, 2013, the company paid $7,500 cash to improve the efficiency of the machine. The effect of the expenditure was to increase the productivity of the machine without increasing its remaining useful life or changing its salvage value. Straight-line depreciation is used throughout the machine's life. a. Prepare the journal entry to record the $7,500 expenditure. b. What amount of depreciation expense should be recorded for 2013?

Q: A company paid $314,000 for a machine that was expected to last five years and have a salvage value of $40,000. During the third year of the machine's life, $37,000 cash was paid for replacement parts that were expected to increase the machine's productivity by 10% each year. Prepare the journal entry to record the $37,000 cost incurred in the third year.

Q: On January 1, a machine costing $260,000 with a four-year life and an estimated $5,000 salvage value was purchased. It was also estimated that the machine would produce 500,000 units during its life. The actual units produced during its first year of operation were 110,000. Determine the amount of depreciation expense for the first year under each of the following assumptions: a. The company uses the straight-line method of depreciation. b. The company uses the units-of-production method of depreciation. c. The company uses the double-declining-balance method of depreciation.

Q: A company purchased equipment for $325,000 on January 2, 2013. The company expects the equipment to last for eight years or 60,000 hours of operation, with an estimated salvage value of $25,000. During 2013, the equipment was in operations for 8,000 hours, while in 2014 the equipment was in operations for 8,700 hours. Compute the depreciation expense relating to the equipment for 2013 and 2014 using the following depreciation methods: a. Straight-line b. Double-declining-balance c. Units-of-production.

Q: A company purchased a machine on January 1 of the current year for $750,000. Calculate the annual depreciation expense for each year of the machine's life (estimated at five years or 20,000 hours, with a salvage value of $75,000). During the machine's five-year life its hourly usage was: 3,000; 4,000; 5,000; 5,000; and 3,000 hours. Year Straight-Line Units-of-Production Double-Declining-Balance Year 1 $ $ $ Year 2 Year 3 Year 4 Year 5 Totals

Q: A company recently paid $1,500,000 to buy a building with an estimated useful life of 20 years and a salvage value of $25,000. Calculate the depreciation expense for the third year after acquisition using the double-declining-balance depreciation.

Q: A new machine is expected to produce 600,000 units of product during its eight-year useful life. The machine cost $1,800,000 cash and it is estimated to have a $60,000 salvage value. What is the first year's depreciation on the machine as calculated by the straight-line method?

Q: A new machine is expected to produce 600,000 units of product during its eight-year useful life. The machine cost $1,800,000 cash and it is estimated to have a $60,000 salvage value. If depreciation on the machine is calculated by the double-declining-balance method, what is the depreciation for the first year?

Q: A new machine is expected to produce 600,000 units of product during its eight-year useful life. The machine cost $1,800,000 cash and it is estimated to have a $60,000 salvage value. If the machine produces 70,000 units of product during its first year, what is the depreciation for the first year as calculated by the units-of-production method?

Q: A company made the following expenditures in connection with the construction of its new building: Architects fees for the new building $ 12,000 Cash paid for land and run-down building on the land 300,000 Removal of old building 18,000 Salvage from sale of old building materials 4,000 Construction survey to site the new building 1,500 Legal fees for title search 3,000 Excavation for basement construction 25,000 Machinery purchased for operations 100,000 Storage charges on machinery because building was not ready when machinery was delivered 900 Freight on machinery purchased 1,600 Hauling charges to deliver machinery from storage to new building 300 Construction costs of new building 1,000,000 Landscaping 20,000 Installation of machinery 2,500 Prepare a schedule showing the amounts to be recorded as land, buildings, and machinery.

Q: A company purchased land on which to construct a new building for a cost of $250,000. Additional costs incurred were: Real estate brokers commissions $15,000 Legal fees incurred in purchase of the real estate 2,500 Landscaping 10,000 Expenses to remove old house located on land 3,000 Proceeds from selling materials salvaged from old house 1,000 What total dollar amount should be charged to land and what amount should be charged to the new building?

Q: A company needed a new building. It found a suitable location with an existing old building on the land. The company reached an agreement to buy the land and the building for $960,000 cash. The old building was demolished to make way for the needed new building. Following is information regarding the demolition of the old building and construction of the new one: Construction cost of new building including $660,000 for parking lot $9,560,000 Demolition of old building 300,000 Proceeds from sale of salvaged materials from old building 120,000 Prepare a single journal entry to record the above costs assuming all transactions are paid in cash.

Q: A company purchased land with a building for a total cost of $2,570,000 ($500,000 paid in cash and the balance on a long-term note). It was estimated that the land and building had market values of $900,000 and $2,100,000, respectively. Determine the cost to be apportioned to the land and to the building and prepare the journal entry to record the acquisition.

Q: A company purchased equipment on July 3 of the current year and placed it in service on August 1. The following costs were incurred in acquiring the equipment. Determine the amount to be recorded as cost for the equipment. Purchase (invoice) price $215,600 Transportation 1,400 Insurance during shipping 200 One-year fire insurance beginning August 1 of the current year 1,200 Installation cost 4,500 Raw materials and direct labor used to test the equipment 1,500

Q: Prepare journal entries to record the following transactions of a company during the current year: Mar. 1 Purchased a truck for $30,000 with a five-year useful life and a $5,000 salvage value. Also paid 6% sales tax, $350 for the annual truck license, $500 to paint the truck with the companys colors and name, and $1,500 for spare parts. All payments were in cash. May 10 Purchased a garage from a neighboring business with a 7%, four-year, $75,000 note. The sellers book value for the garage was $42,750. The estimated remaining useful life of the garage is 10 years. June 1 Paid $1,000 cash to replace (uninsured) garage windows broken during a storm. Aug. 25 Purchased used office equipment for $14,700 cash. Sales tax was $825, freight costs $250, and reconditioning costs $900, all of which were paid in cash. The estimated useful life of the equipment is 3 years and salvage value is $500. Oct. 5 Purchased store equipment for $24,500 cash. Paid $1,470 in sales tax,. $550 for repairs incurred from an accident during installation, $3,200 for a special base to house the equipment, and $2,600 for supplies to be used during periodic preventive maintenance. The estimated useful life of the equipment is eight years and salvage value is $1,200.

Q: A company paid $770,000 plus $5,000 in closing costs for property that included land appraised at $384,000; land improvements appraised at $128,000; and a building appraised at $288,000. The plan is to use the building as a manufacturing plant. Determine the amounts that should be recorded as: a. Land............................ $___________________ b. Land Improvements.... $___________________ c. Building...................... $___________________

Q: A company purchased a special purpose machine on August 1 of the past year and it was installed and ready to run on January 1 of this year. The following costs were incurred in the purchase and installation of the machine. Determine the total cost of the machine. Invoice price $1,200,000 Freight costs 6,000 Installation costs 64,000 Electrical and power connections 32,000 Repairs to correct damage incurred during uncrating 12,000 Costs to adjust machine to appropriate specifications 56,000 Spare parts for future use 108,000 Sales tax 70,500 Fines incurred during transport of machine 400 Cost of special foundation required for machine installation 28,500

Q: Heidel Co. paid $750,000 cash to buy the plant assets of Rogers Co. which went out of business. An independent appraiser assigned the following values to the assets acquired: Land $522,000 Building 243,000 Equipment 135,000 Total $900,000 Prepare Heidel's journal entry to record the acquisition of these assets.

Q: A company had net sales of $541,500 in 2013 and $475,300 in 2014. Its average assets were $410,000 for 2013 and $400,000 for 2014. (1) Calculate the total asset turnover for each year. (2) Interpret and comment on the company's efficiency in the use of its assets.