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Exam 10: Long Term Assets

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Question 121

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Additions and betterments are examples of revenue expenditures.

A) True
B) False

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Question 122

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The cost of developing computer software should be capitalized and amortized over the software's useful life after it has been proved technologically feasible.

A) True
B) False

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Question 123

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Land and a building on the land are purchased for $672,000.The appraised values of the land and building are $120,000 and $600,000,respectively.The cost allocated to the building should be

The following machines were purchased during 2013: Machine A for $12,000 on April 7 Machine B for $8,000 on August 28 Machine C for $10,000 on November 5 Assuming that each machine has an estimated useful life of six years and a 10 percent residual value,calculate total depreciation expense for 2013 (assume that the company depreciates the asset on straight-line basis,reports on a calendar-year basis and rounds to the nearest month).

Under the successful efforts method,the costs of both successful and unsuccessful exploration for oil and gas are recorded as assets.

On January 1,2012,Pung Manufacturing Company purchased for $94,000 a machine that will produce an estimated 75,000 units of Product X.The machine has an estimated useful life of five years and an estimated residual value of $4,000.Calculate the following amounts: (a)the carrying value of the machine after it has been used for three and one-half years,under the straight-line method; (b)depreciation expense for 2013,under the production method (assume that 13,000 units were produced that year); and (c)accumulated depreciation at the end of 2013,under the double-declining-balance method.(Show your work.)

In calculating the depletion of a natural resource,its useful life in years is irrelevant.

A capital expenditure results in the recognition of an asset.

A revenue expenditure results in a

Match each definition with the correct term below. -Betterments A)Enlargements of a plant's physical layout. B)A right to occupy land or buildings under a long-term contract. C)The portion of an asset's acquisition cost that a company expects to recover when it disposes of the asset. D)The proportional allocation of the cost of a natural resource to the units extracted. E)A registered symbol that can be used only by its owner to identify a product or service. F)The excess of the amount paid for a business over the fair market value of the business's net assets. G)The periodic allocation of the cost of an intangible long-lived asset to the periods it benefits. H)Improvements to a plant asset that do not add to the plant's physical layout. I)The total number of service units expected from a long-term asset. J)The periodic allocation of the cost of a tangible long-lived asset over its estimated useful life.

In 2013,Minneapolis Mining purchased a mineral deposit for $12,000,000.It is estimated that 15,000,000 tons can be extracted from the mine.Calculate depletion expense during 2013 when 700,000 tons were extracted and sold.

Fair value is the amount for which an asset could be bought or sold in a current transaction.

The cost of land would not include the cost of a building purchased with the land and torn down because it was not needed.

When calculating a partial year's depreciation,the length of time an asset has been owned usually is rounded to the nearest month.This rounding practice is justified by the principle or rule of

Carrying value

Which of the following is not a component of free cash flow?

Al's Car Wash purchased a piece of equipment on October 1,2011,for $27,000.The equipment has an estimated life of four years or 40,000 units of production and an estimated residual value of $2,000.Compute depreciation for 2011,2012,and 2013 using the following methods: (a)straight-line,(b)production,and (c)double-declining-balance.Assume that the company's fiscal year corresponds to the calendar year and that 3,000,12,000,and 8,000 units were produced in the respective years.(Show your work.)

In the journal provided,prepare entries for the following independent transactions.(Omit explanations.) a.Purchased land and a building on the land for $960,000.The appraised values of the land and building are $350,000 and $650,000,respectively. b.Paid $5,000 for a sewage system,$15,000 for a parking lot,$1,000 to tear down a shack on land just purchased,and $10,000 for a block wall. c.Purchased a truck two years ago for $18,000 with an original six-year estimated useful life and $3,000 residual value.After a full two years of use,revised the residual value to $4,000 and the useful life to a total of seven years.Record depreciation for year 3,assuming the straight-line method. d.Purchased a machine on May 1,2013 (assume a calendar-year accounting period)for $15,000.The machine has an estimated life of 10,000 hours and no salvage value.Record depreciation for 2013 under the production method,assuming that the machine was used 2,000 hours.