FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 8: Accounting for Long-Term Operational Assets

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 21

Multiple Choice

Review LaterAdd Note

Review Later

On January 1,Year 1,Dinwiddie Company purchased a car that cost $45,000.The car has an expected useful life of 5 years and a $10,000 salvage value.Which of the following statements is true?

A) The total amount of depreciation expense recognized over the six-year useful life will be greater under the double-declining-balance method than the straight-line method.
B) The amount of depreciation expense recognized in Year 4 would be greater if Dinwiddie depreciates the car under the straight-line method than if the double-declining-balance method is used.
C) At the end of Year 2, the amount in accumulated depreciation account will be less if the double-declining-balance method is used than it would be if the straight-line method is used.
D) None of these statements is true.

E) None of the above
F) A) and B)

Correct Answer

verified

Show Answer

Question 22

Multiple Choice

Review LaterAdd Note

Review Later

Goodwill may be recorded in which of the following circumstances?

A) When the property, plant and equipment of a business increase in value
B) When a business earns a very high net income
C) When a business sells property for more than its book value
D) When one business acquires another business

E) None of the above
F) A) and D)

Correct Answer

verified

Show Answer

Question 23

Multiple Choice

Review LaterAdd Note

On March 1,Bartholomew Company purchased a new stamping machine with a list price of $34,000.The company paid cash for the machine; therefore,it was allowed a 5% discount.Other costs associated with the machine were: transportation costs,$550; sales tax paid,$1,360; installation costs,$450; routine maintenance during the first month of operation,$500.What is the cost of the machine?

On January 1,Year 1,the City Taxi Company purchased a new taxi cab for $36,000.The cab has an expected salvage value of $2,000.The company estimates that the cab will be driven 200,000 miles over its life.It uses the units-of-production method to determine depreciation expense.The cab was driven 45,000 miles the first year and 48,000 the second year.What is the amount of depreciation expense reported on the Year 2 income statement and the book value of the taxi at the end of Year 2,respectively?

When using the modified accelerated cost recovery system (MACRS)the highest amount of depreciation expense will be recognized in the year the asset is acquired.

[The following information applies to the questions displayed below.] Farmer Company purchased machine on January 1, Year 1 for $82,000. The machine is estimated to have a 5-year life and a salvage value of $4,000. The company uses the straight-line method. -On January 1,Year 1,Ballard company purchased a machine for $52,000.On January 1,Year 2,the company spent $12,000 to improve its quality.The machine had a $4,000 salvage value and a 6-year life,which are unchanged.Ballard uses the straight-line method.What is the book value of the machine on December 31,Year 4?

Which of the following statements is true regarding depreciation expense?

Indicate whether each of the following statements is true or false.

On January 1,Year 1,Stiller Company paid $80,000 to obtain a patent.Stiller expected to use the patent for 5 years before it became technologically obsolete.The remaining legal life of the patent was 8 years.Based on this information,what is the amount of amortization expense during Year 3 and the book value of the patent as of December 31,Year 3,respectively?

For Year 1,Oscar Company records depreciation expense of $12,000 on its income statement and $9,000 of MACRS depreciation on its tax return.Which of the following answers is correct regarding the difference between the two figures?

Generally accepted accounting principles require that,when the estimated useful life of a long-term asset is changed,previously-issued financial statements should not be revised.

Flagler Company purchased equipment that cost $90,000.The equipment had a useful life of 5 years and a $10,000 salvage value.Flagler uses the double-declining-balance method.Which of the following choices accurately reflects how the recognition of the first year's depreciation would affect the elements of the financial statements?

On January 6,Year 1,Mount Jackson Corporation purchased a tract of land for a factory site for $1,500,000.An existing building on the site was demolished and the new factory was completed on October 11,Year 1.Additional cost data are shown below: Which of the following are the capitalized costs of the land and the new building,respectively?

Indicate whether each of the following statements is true or false.

Land differs from other property because it is not subject to depreciation.

Which of the following industries would most likely have the highest value for the ratio of sales to property,plant,and equipment?

Ernie Company acquired Bert Company in January of Year 1.Bert's balance sheet included $700,000 of assets,$250,000 of liabilities and stockholders' equity of $450,000.Ernie agrees to assume the liabilities and pay $480,000 to acquire Bert.An independent appraiser assessed the fair value of Bert's assets to be $630,000.Indicate whether each of the following statements about this transaction is true or false.

An expenditure that improves the quality of service provided by a plant asset is added to the historical cost of the asset.

The depreciable cost of a long-term asset is the difference between the amount paid for the asset and its salvage value.

Anchor Company purchased a manufacturing machine with a list price of $160,000 and received a 2% cash discount on the purchase.The machine was delivered under terms FOB shipping point,and transportation costs amounted to $2,400.Anchor paid $3,000 to have the machine installed and tested.Insurance costs to protect the asset from fire and theft amounted to $3,600 for the first year of operations.What is the cost of the machine?