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Exam 10: Fixed Assets and Intangible Assets

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Question 51

Multiple Choice

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A building with an appraisal value of $154,000 is made available at an offer price of $172,000. The purchaser acquires the property for $40,000 in cash, a 90-day note payable for $45,000, and a mortgage amounting to $75,000. The cost basis recorded in the buyer's accounting records to recognize this purchase is

A) $154,000
B) $172,000
C) $160,000
D) $120,000

E) All of the above
F) A) and B)

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Question 52

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Select the following as a Fixed Asset (FA), or Intangible Asset (IA), or Natural Resource (NR), or Neither (N)

Premises

Responses

oil reserve

Neither (N)

goodwill

Asset (FA)

computer

Intangible Asset (IA)

gold mine

Natural Resource (NR)

land used for employee parking

U. S. Treasury note

patent

Premises

oil reserve

goodwill

computer

gold mine

land used for employee parking

U. S. Treasury note

patent

Responses

Neither (N)

Asset (FA)

Intangible Asset (IA)

Natural Resource (NR)

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Correct Answer

Premises

Responses

oil reserve

goodwill

computer

gold mine

land used for employee parking

U. S. Treasury note

patent

Premises

oil reserve

goodwill

computer

gold mine

land used for employee parking

U. S. Treasury note

patent

Responses

Question 53

Multiple Choice

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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?

Comment on the validity of the following statements. "As an asset loses its ability to provide services, cash needs to be set aside to replace it. Depreciation accomplishes this goal."

Equipment purchased at the beginning of the fiscal year for $360,000 is expected to have a useful life of 5 years, or 14,000 operating hours, and a residual value of $10,000. Compute the depreciation for the first and second years of use by each of the following methods: (Round the answer to the nearest dollar.)

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

In a lease contract, the party who legally owns the asset is the

The normal balance of the accumulated depreciation account is debit.

When depreciation estimates are revised, all years of the asset's life are affected.

Land acquired as a speculation is reported under Investments on the balance sheet.

On December 31 it was estimated that goodwill of $65,000 was impaired. In addition, a patent with an estimated useful economic life of 10 years was acquired for $60,000 on July 1.

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

The entry to record the disposal of fixed assets will include a credit to accumulated depreciation.

A used machine with a purchase price of $77,000, requiring an overhaul costing $8,000, installation costs of $5,000, and special acquisition fees of $3,000, would have a cost basis of

Macon Co. acquired drilling rights for $7,500,000. The oil deposit is estimated at 37,500,000 gallons. During the current year, 3,000,000 gallons were drilled. Journalize the adjusting entry at December 31, 2011 to recognize the depletion expense. Journal

A capital lease is accounted for as if the asset has been purchased.

The calculation for annual depreciation using the units-of-production method is

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 declining-balance method at twice the straight-line rate and (b) the straight-line method. Assume a fiscal year ending December 31.

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 be changed.

All of the following below are needed for the calculation of straight-line depreciation except