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Exam 9: Fixed Assets and Intangible Assets

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Question 41

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Capital expenditures are costs of acquiring,constructing,adding,or replacing property,plant and equipment.

A) True
B) False

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Question 42

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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 Record the depreciation for the one-half year prior to the sale,using the straight-line method. b Record the sale of the equipment. c Assuming that the equipment had been sold for $25,000 cash,prepare the entry to record the sale.

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Question 43

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

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.

When minor errors occur in the estimates used in the determination of depreciation,the amounts recorded for depreciation expense in the past should be corrected.

All property,plant,and equipment assets are depreciated over time.

On June 1,Michael 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 or 30,000 hours. Using straight-line depreciation,calculate depreciation expense for the second year.

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?

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

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

Patents are exclusive rights to produce and sell goods with one or more unique features.

Once the useful life of a depreciable asset has been estimated and the amount to be depreciated each year has been determined,the amounts can not be changed.

On the first day of the fiscal year,a new walk-in cooler with a list price of $58,000 was acquired in exchange for an old cooler and $44,000 cash.The old cooler had a cost of $25,000 and accumulated depreciation of $16,000.Assume the transaction has commercial substance. a Determine the gain to be recorded on the exchange. b Journalize the entry to record the exchange.

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

A capital expenditure results in a debit to

Carter Co.acquired drilling rights for $18,550,000.The oil deposit is estimated at 74,200,000 gallons.During the current year,6,000,000 gallons were drilled.Journalize the adjusting entry at December 31 to recognize the depletion expense. $\begin{array}{|c|l|c|c|c|}\hline \text { Date } & \text { Description } & \begin{array}{c}\text { Post. } \\\text { Ref. }\end{array} & \text { Debit } & \text { Credit } \\\hline \\\hline \\\hline\end{array}$

Residual value is also known as all of the following except

Determine the depreciation,for the year of acquisition and for the following year,of a fixed asset acquired on October 1 for $500,000,with an estimated life of 5 years,and residual value of $50,000,using a the double declining-balance method and b the straight-line method.Assume a fiscal year ending December 31.

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

When old equipment is traded in for a new equipment,the difference between the list price and the trade in allowance is called boot.