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Exam 9: Fixed Assets and Intangible Assets

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Question 61

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Solare Company acquired mineral rights for $60,000,000. The diamond deposit is estimated at 6,000,000 tons. During the current year, 2,300,000 tons were mined and sold.

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Question 62

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If a fixed asset, such as a computer, were purchased on January 1st for $3,750 with an estimated life of 3 years and a salvage or residual value of $150, the journal entry for monthly expense under straight-line depreciation is: (Note: EOM indicates the last day of each month.)

A) EOM Depreciation Expense $\quad$ 100
Accumulated Depreciation $\quad$ 100

B) EOM Depreciation Expense $\quad 1,200$
Accumulated Depreciation $\quad$ 1,200

C) EOM Accumulated Depreciation $\quad$ 1,200
Depreciation Expense $\quad$ 1,200

D) EOM Accumulated Depreciation $\quad$ 100
Depreciation Expense $\quad$ 100

E) A) and B)
F) A) and C)

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Question 63

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An asset was purchased for $58,000 and originally estimated to have a useful life of 10 years with a residual value of $3,000. After two years of straight line depreciation, it was determined that the remaining useful life of the asset was only 2 years with a residual value of $2,000. a) Determine the amount of the annual depreciation for the first two years. b) Determine the book value at the end of the 2nd year. c) Determine the depreciation expense for each of the remaining years after revision.

When a company exchanges machinery and receives a trade-in allowance greater than the book value, this transaction would be recorded with the following entry (assuming the exchange was considered to have commercial substance) :

The acquisition costs of property, plant, and equipment should include all normal, reasonable and necessary costs to get the asset in place and ready for use.

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, calculate depreciation expense for the second year.

Equipment was acquired at the beginning of the year at a cost of $75,000. The equipment was depreciated using the straight-line method based upon an estimated useful life of 6 years and an estimated residual value of $7,500.

As a company records depreciation expense for a period of time a corresponding cash inflow from investing activities is reported on the statement of cash flows.

Which of the following is true?

The amount of depreciation expense for a fixed asset costing $95,000, with an estimated residual value of $5,000 and a useful life of 5 years or 20,000 operating hours, is $21,375 by the units-of-production method during a period when the asset was used for 4,500 hours.

The exclusive right to use a certain name or symbol is called a

Land acquired as a speculation is reported under Investments on the balance sheet.

An operating lease is accounted for as if the lessee has purchased the asset.

A building with an appraisal value of $154,000 is made available at an offer price of $172,000. The purchaser acquires the property for $40,000 in cash, a 90-day note payable for $45,000, and a mortgage amounting to $75,000. The cost basis recorded in the buyer's accounting records to recognize this purchase is

A fixed asset with a cost of $41,000 and accumulated depreciation of $36,000 is traded for a similar asset priced at $50,000. Assuming a trade-in allowance of $4,000, the cost basis of the new asset is

The accumulated depletion account is

Eagle Country Club has acquired a lot to construct a clubhouse. Eagle had the following costs related to the construction:

Determine the depreciation, for the year of acquisition and for the following year, of a fixed asset acquired on October 1 for $500,000, with an estimated life of 5 years, and residual value of $50,000, using (a) the declining-balance method at twice the straight-line rate and (b) the straight-line method. Assume a fiscal year ending December 31.

In a lease contract, the party who legally owns the asset is the

A machine costing $85,000 with a 5-year life and $5,000 residual value was purchased January 2, 2011. Compute depreciation for each of the five years, using the declining-balance method at twice the straight-line rate.