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Exam 9: Fixed Assets and Intangible Assets

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Question 21

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A new machine with a purchase price of $109,000, with transportation costs of $12,000, installation costs of $5,000, and special acquisition fees of $6,000, would have a cost basis of

A) $114,000
B) $126,000
C) $121,000
D) $132,000

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

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Question 22

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Minerals removed from the earth are classified as intangible assets.

A) True
B) False

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Question 23

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

Computer equipment (office equipment) purchased 6 1/2 years ago for $170,000, with an estimated life of 8 years and a residual value of $10,000, is now sold for $60,000 cash. (Appropriate entries for depreciation had been made for the first six years of use.) Journalize the following entries:

A copy machine acquired on March 1, 2011 with a cost of $705 has an estimated useful life of 4 years. Assuming that it will have a residual value of $125, determine the depreciation for the first year by the double-declining-balance method.

Prepare the following journal entries and calculations:

It is necessary for a company to use the same depreciation method for all of its depreciable assets.

On July 1, 2010, Howard Co. acquired patents rights for $40,000. The patent has a useful life of 8 years and a legal life of 15 years. Journalize the adjusting entry on December 31, 2010 to recognize the amortization. Journal

For income tax purposes most companies use an accelerated deprecation method called double declining balance.

When cities give land or buildings to a company to locate in the community, no entry is made since there is no cost to the company.

Equipment costing $80,000 with a useful life of 10 years and a residual value of $8,000 has been depreciated for 6 years by the straight-line method. Assume a fiscal year ending December 31.

A capital expenditure results in a debit to

Identify each of the following expenditures as chargeable to Land, Land Improvements,Buildings, Machinery and Equipment, or other account.

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

Capital expenditures are costs that are charged to Stockholders' Equity accounts.

On December 31, Strike Company has decided to discard 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 following will be included in the entry to record the disposal.

Expenditures that increase operating efficiency or capacity for the remaining useful life of a fixed asset are betterments.

When a company discards machinery that is fully depreciated, this transaction would be recorded with the following entry

When selling a piece of equipment for cash, a loss will result when the proceeds of the sale are less than the book value of the asset.

The method of determining depreciation that yields successive reductions in the periodic depreciation charge over the estimated life of the asset is