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Exam 8: Long-Term Assets

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Question 31

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Total asset turnover is calculated by dividing:

A) Gross profit by average total assets.
B) Average total assets by gross profit.
C) Net sales by average total assets.
D) Average total assets by net sales.
E) Net assets by total assets.

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

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Question 32

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The process of allocating the cost of a natural resource to the period when it is consumed is called _____________________.

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Question 33

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Accumulated depreciation represents funds set aside to buy new assets when the assets currently owned are replaced.

___________________ are additional costs of plant assets that do not materially increase the asset's life or productive capabilities.

Depletion:

The total cost of an asset less its accumulated depreciation is called:

A plant asset's useful life might not be the same as its productive life.

A company used straight-line depreciation for an item of equipment that cost $12,000,had a salvage value of $2,000,and had a five-year useful life.After depreciating the asset for three complete years,the salvage value was reduced to $1,200 and its total useful life was increased from five years to six years.Determine the amount of depreciation to be charged against the machine during each of the remaining years of its useful life:

Mason Company sold a piece of equipment for $25,000 cash on December 31 after recording the annual depreciation on the asset.The equipment had an original cost of $92,500 and accumulated depreciation of $60,000.Prepare the general journal entry to record the sale of this asset.

Beauty Company purchased a machine valued at $565,000 on September 1.The equipment has an estimated useful life of eight years or 5.5 million units.The equipment is estimated to have a salvage value of $48,300.Assuming the double declining balance method of depreciation is used,what is depreciation expense that needs to be recorded at the end of the second year?

A company paid $314,000 for a machine that was expected to last five years and have a salvage value of $40,000.During the third year of the machine's life,$37,000 cash was paid for replacement parts that were expected to increase the machine's productivity by 10% each year.Prepare the journal entry to record the $37,000 cost incurred in the third year.

Acme Company has a total asset turnover of 1.25 for the current period.What are net sales given that average total assets are $40,000?

On April 1,2013,a company disposed of equipment for $14,200 cash that had cost $35,000 on January 1,2008.The equipment had a salvage value of $5,000 and a useful life 10 years.The double-declining-balance depreciation method was used.On December 31,2012,accumulated depreciation was $20,664.Prepare a journal entry to record depreciation for 2013 up to the date of disposal of the equipment and prepare a journal entry to record the disposal of the equipment.

During the current year,a company exchanged an old truck costing $58,000 with accumulated depreciation of $52,000 for a new truck.The new truck had a cash price of $80,000 and the company received a $16,000 trade-in allowance on the old truck with the balance of $64,000 paid in cash.Prepare the journal entry to record the exchange.

Ace Company purchased a machine valued at $320,000 on August 1.The equipment has an estimated useful life of five years or 2.5 million units.The equipment is estimated to have a salvage value of $8,200.Assuming the double-declining-balance method of depreciation,what is the amount of depreciation expense that needs to be recorded at the end of the second year?

The units-of-production method of depreciation charges a varying amount of expense for each period of an asset's useful life depending on its usage.

When the value of plant assets decline after acquisition,but before disposition,both GAAP and IFRS require companies to record those decreases as impairment losses.

A company's property records revealed the following information about its plant assets: $\begin{array} { | c | c | c | c | l | } \hline \begin{array} { c } \text { Machire } \\\text { No. }\end{array} & \text { Cost } & \text { Salvage Value } & \text { Purchase Date } & \begin{array} { c } \text { Depreciation Method and } \\\text { Estimate Life }\end{array} \\\hline 1 & \$ 42,000 & \$ 3,000 & 10 / 1 / 12 & \text { Straight-line (3 years) } \\\hline 2 & 86,000 & 8,600 & 7 / 1 / 12 & \begin{array} { l } \text { Double-declining-balance } \\\text { (5 years) }\end{array} \\\hline\end{array}$ Calculate the depreciation expense for each machine for the year ended December 31,2013,and for the year ended December 31,2012. Machine 1: 2012 _______________________ 2013 _______________________ Machine 2: 2012 _______________________ 2013 _______________________

Why is the useful life of a plant asset so difficult to predict?

A change in an accounting estimate is: