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Exam 9: Fixed Assets and Intangible Assets

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Question 51

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Patents are exclusive rights to manufacture, use, or sell a particular product or process.

A) True
B) False

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Question 52

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Williams Company acquired machinery on July 1, 2009, at a cost of $130,000. The estimated useful life of the machinery was 10 years and the estimated residual value was $10,000. Williams uses the double-declining-balance method of depreciation. On October 1, 2012, Williams sold the equipment for $75,000. 1) Record the journal entry for the depreciation on this machinery for 2012. 2) Record the journal entry for the sale of the machinery.

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Depreciation Expense 11,232
Ac...

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Question 53

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Comment on the validity of the following statements. "As an asset loses its ability to provide services, cash needs to be set aside to replace it. Depreciation accomplishes this goal."

An intangible asset is one that has a physical existence.

Costs associated with normal research and development activities should be treated as intangible assets.

Clanton Company engaged in the following transactions during 2011. Record each in the general journal below: 1) On January 3, 2011, Clanton purchased a copyright from Dalton Company with a cost of $250,000 with a remaining useful life of 25 years. 2) On January 10, 2011, Clanton purchased a trademark from Felton Company with a cost of $700,000. 3) On July 1, 2011, Clanton purchased a patent from Garrison Company at a cost of $80,000. The remaining legal life of the patent is 15 years and the expected useful life is 11 years. 4) On July 2, 2011, Clanton paid $30,000 in legal fees to defend the patent protection purchased on July 1, 2011. 5) Recorded the appropriate amortization for the intangible assets for 2011. 6) Clanton Company includes an asset in its ledger recorded when Clanton purchased a computer service business at a price in excess of the fair value of the assets of the company in the amount of $400,000. At December 31, 2011, $100,000 of this asset has become impaired. $\begin{array} { | l | l | l | l | } \hline \text { Date } & \text { Description } & \text { Debit } & \text { Credit } \\\hline & & & \\\hline & & & \\\hline & & & \\\hline & & & \\\hline & & & \\\hline & & & \\\hline & & & \\\hline & & & \\\hline & & & \\\hline & & & \\\hline & & & \\\hline & & & \\\hline & & & \\\hline & & & \\\hline & & & \\\hline & & & \\\hline & & & \\\hline & & & \\\hline & & & \\\hline & & & \\\hline & & & \\\hline & & & \\\hline & & & \\\hline & & & \\\hline\end{array}$

Computer equipment was acquired at the beginning of the year at a cost of $63,000 that has an estimated residual value of $3,000 and an estimated useful life of 5 years. Determine the (a) depreciable cost (b) double-declining-balance rate, and (c) double-declining-balance depreciation for the first year.

On April 15, Compton Co. paid $2,800 to upgrade a delivery truck and $125 for an oil change. Journalize the entries for the upgrade to delivery truck and oil change expenditures.

The double declining balance depreciation method calculates depreciation each year by taking twice the straight line rate times the book value of the asset at the beginning of each year.

Land acquired so it can be resold in the future is listed in the balance sheet as a(n)

A copy machine acquired with a cost of $1,410 has an estimated useful life of 4 years. It is also expected to have a useful operating life of 13,350 copies. Assuming that it will have a residual value of $75, determine the depreciation for the first year by the

When a property, plant, and equipment asset is sold for cash, any gain or loss on the asset sold should be recorded.

When determining whether to record an asset as a fixed asset, what two criteria must be met?

Standby equipment held for use in the event of a breakdown of regular equipment is reported as property, plant, and equipment on the balance sheet.

The Bacon Company acquired new machinery with a price of $15,200 by trading in similar old machinery and paying $12,700. The old machinery originally cost $9,000 and had accumulated depreciation of $5,000. In recording this transaction, Bacon Company should record

The amount of depreciation expense for the first full year of use of a fixed asset costing $95,000, with an estimated residual value of $5,000 and a useful life of 5 years, is $19,000 by the straight-line method.

When a company exchanges machinery and receives a trade-in allowance less than the book value, this transaction would be recorded with the following entry:

Equipment was purchased on January 5, 2011, at a cost of $90,000. The equipment had an estimated useful life of 8 years and an estimated residual value of $8,000. After using the equipment for 3 years, the useful life was revised to a total of 10 years and the residual value was reduced to $2,004. Determine the straight-line depreciation expense for the year 2014 and following years.

Equipment acquired on January 2, 2011 at a cost of $273,500 has an estimated useful life of eight years and an estimated residual value of $35,500. Required:

On June 1, 2014, Aaron Company purchased equipment at a cost of $120,000 that has a depreciable cost of $90,000 and an estimated useful life of 3 years and 30,000 hours. Using straight line depreciation, prepare the journal entry to record depreciation expense for (a) the first year, (b) the second year and (c) the last year.