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Exam 8: Accounting for Long-Term Assets

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Question 141

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A change in an accounting estimate is:

A) Reflected in past financial statements.
B) Reflected in future financial statements and also requires modification of past statements.
C) Reflected in current and future years' financial statements, not in prior statements.
D) Not allowed under current accounting rules.
E) Considered an error in the financial statements.

F) B) and D)
G) C) and D)

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Question 142

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Another name for a capital expenditure is:

A) Revenue expenditure.
B) Asset expenditure.
C) Long-term expenditure.
D) Contributed capital expenditure.
E) Balance sheet expenditure.

F) C) and D)
G) B) and D)

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Question 143

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Capital expenditures that extend an asset's useful life beyond its original estimate are called ________.

The cost of land would not include:

A machine costing $75,000 is purchased on September 1,Year 1.The machine is estimated to have a salvage value of $10,000 and an estimated useful life of 4 years.Double-declining-balance depreciation is used.If the machine is sold on December 31,Year 3 for $13,000,the journal entry to record the sale will include:

On April 1,Year 1,Raines Co.purchased and placed a plant asset in service.The following information is available regarding the plant asset: $\begin{array} { l l } \text { Acquisition cost } & \$ 130,000 \\\text { Estimated salvage value } & \$ 15,000 \\\text { Estimated useful life } & 5 \text { years }\end{array}$ Make the necessary adjusting journal entries at December 31,Year 1,and December 31,Year 2 to record depreciation for each year under the double-declining balance depreciation method:

Match each of the following terms with the appropriate definitions. -The total cost of a plant asset less its accumulated depreciation.

A company purchased a tract of land for its natural resources at a cost of $1,500,000.It expects to mine 2,000,000 tons of ore from this land.The salvage value of the land is expected to be $250,000.The depletion expense per ton of ore is:

The depreciation method that charges the same amount of expense to each period of the asset's useful life is called:

Peavey Enterprises purchased a depreciable asset for $22,000 on April 1,Year 1.The asset will be depreciated using the straight-line method over its four-year useful life.Assuming the asset's salvage value is $2,000,Peavey Enterprises should recognize depreciation expense in Year 2 in the amount of:

Cliff Company traded in an old truck for a new one.The old truck had a cost of $75,000 and accumulated depreciation of $60,000.The new truck had an invoice price of $125,000.Huffington was given a $12,000 trade-in allowance on the old truck,which meant they paid $113,000 in addition to the old truck to acquire the new truck.If this transaction has commercial substance,what is the recorded value of the new truck?

Match each of the following terms with the appropriate definitions. -Assets that increase the benefits of land,have a limited useful life,and are subject to depreciation.

A plant asset's useful life is the length of time it is productively used in a company's operations.

A company purchased a tract of land for its natural resources at a cost of $1,500,000.It expects to mine 2,000,000 tons of ore from this land.The salvage value of the land is expected to be $250,000.If 150,000 tons of ore are mined during the first year,the journal entry to record the depletion is:

When plant assets are purchased as a group in a single transaction for a lump-sum price,the cost of the purchase is allocated among the different types of assets acquired based on their relative market values.

McClintock Co.had the following transactions involving plant assets during Year 1.Unless otherwise indicated,all transactions were for cash. Prepare the general journal entries to record these transactions.

Match each of the following terms with the appropriate definitions. -A cost reported as an expense on the current income statement because it does not provide a material benefit in future periods.

Prepare journal entries to record the following transactions of a company during the current year:

Peavey Enterprises purchased a depreciable asset for $22,000 on April 1,Year 1.The asset will be depreciated using the straight-line method over its four-year useful life.Assuming the asset's salvage value is $2,000,what will be the amount of accumulated depreciation on this asset on December 31,Year 3?

Which of the following statements regarding increases in the value of plant assets under U.S.GAAP and IFRS is true?