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Exam 9: Fixed Assets and Intangible Assets

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Question 61

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

A) True
B) False

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Question 62

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On October 1, Sebastian Company acquired new equipment with a fair market value of $458,000. Sebastian received a trade-in allowance of $92,000 on the old equipment of a similar type and paid cash of $366,000. The following information about the old equipment is obtained from the account in the equipment ledger: Cost, $336,000; accumulated depreciation on December 31, the end of the preceding fiscal year, $220,000; annual depreciation, $20,000. Assuming the exchange has commercial substance, journalize the entries to record: (a) the current depreciation of the old equipment to the date of trade-in and (b) the exchange transaction on October 1.

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Question 63

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The amount of depreciation expense for a fixed asset costing $95,000, with an estimated residual value of $5,000 and a useful life of 5 years or 20,000 operating hours, is $21,375 by the units-of-production method during a period when the asset was used for 4,500 hours.

The Bacon Company acquired new machinery with a price of $15,200 by trading in similar old machinery and paying $12,700. The old machinery originally cost $9,000 and had accumulated depreciation of $5,000. In recording this transaction, Bacon Company should record

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

During construction of a building, the cost of interest on a construction loan should be charged to an expense account.

A building with an appraisal value of $147,000 is made available at an offer price of $152,000. The purchaser acquires the property for $35,000 in cash, a 90-day note payable for $45,000, and a mortgage amounting to $65,000. The cost basis recorded in the buyer's accounting records to recognize this purchase is

Computer equipment was acquired at the beginning of the year at a cost of $45,000 that has an estimated residual value of $3,000 and an estimated useful life of 4 years. Determine the (a) depreciable cost, (b) straight-line rate, and (c) annual straight-line depreciation.

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.

The calculation for annual depreciation using the straight-line depreciation method is

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

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

All leases are classified as either

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:

Eagle Country Club has acquired a lot to construct a clubhouse. Eagle had the following costs related to the construction: Determine the cost of the Club House to be reported on the balance sheet.

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.

Residual value is incorporated in the initial calculations for double-declining-balance depreciation.

A copy machine acquired with a cost of $1,410 has an estimated useful life of 4 years. It is also expected to have a useful operating life of 13,350 copies. Assuming that it will have a residual value of $75, determine the depreciation for the first year by the

What is the cost of the land, based upon the following data? $\begin{array}{ll}\$ 178,000 & \text { Land purchase price } \\15,000 & \text { Broker's commission } \\& \text { Payment for the demolition } \\5,000 & \text { and removal of existing building } \\& \text { Cashreceived from the sale of materials } \\2,000 & \text { salvaged from the demolished building }\end{array}$

On April 15, Compton Co. paid $1,350 to upgrade a delivery truck and $45 for an oil change. Journalize the entries for the delivery truck and oil change expenditures.