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Exam 10: Fixed Assets and Intangible Assets

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Question 1

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All leases are classified as either

A) capital leases or long-term leases
B) capital leases or operating leases
C) operating leases or current leases
D) long-term leases or current leases

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

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Question 2

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The difference between the balance in a fixed asset account and its related accumulated depreciation account is the asset's book value.

A) True
B) False

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Question 3

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

On December 31, Strike Company has decided to sell one of its batting cages. The initial cost of the equipment was $310,000 with an accumulated depreciation of $260,000. Depreciation has been taken up to the end of the year. The company found a company that is willing to buy the equipment for $55,000. What is the amount of the gain or loss on this transaction?

When a plant asset is traded for another similar asset, losses on the asset traded are recognized.

A machine with a cost of $75,000 has an estimated residual value of $5,000 and an estimated life of 4 years or 18,000 hours. What is the amount of depreciation for the second full year, using the double declining-balance method?

On July 1st, Hartford Construction purchases a bulldozer for $228,000. The equipment has a 9 year life with a residual value of $16,000. Hartford uses units-of-production method depreciation and the bulldozer is expected to yield 26,500 operating hours. (a) Calculate the depreciation expense per hour of operation. (b) The bulldozer is operated 1,250 hours in the first year, 2,755 hours in the second year, and 1,225 hours in the third year of operations. Journalize the depreciation expense for each year.

The method used to calculate the depletion of a natural resource is the straight line method.

An intangible asset is one that has a physical existence.

Expenditures that add to the utility of fixed assets for more than one accounting period are

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 the amount of use of a fixed asset varies from year to year, the method of determining depreciation expense that best matches allocation of cost with revenue is

Equipment with a cost of $220,000 has an estimated residual value of $30,000 and an estimated life of 10 years or 19,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 2,100 hours?

The double-declining-balance method is an accelerated depreciation method.

Machinery acquired at a cost of $80,000 and on which there is accumulated depreciation of $55,000 (including depreciation for the current year to date) is exchanged for similar machinery. For financial reporting purposes, present entries to record the disposition of the old machinery and the acquisition of new machinery under each of the following assumptions:

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 first year.

The book value of a fixed asset reported on the balance sheet represents its market value on that date.

Fill in the missing numbers using the formula for Fixed Asset Turnover:

The cost of computer equipment does include the consultant's fee to supervise installation of the equipment.

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.