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Exam 10: Fixed Assets and Intangible Assets

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Question 31

Multiple Choice

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A capital expenditure results in a debit to

A) an expense account
B) a capital account
C) a liability account
D) an asset account

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

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Question 32

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Though a piece of equipment is still being used, the equipment should be removed from the accounts if it has been fully depreciated.

A) True
B) False

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Question 33

Multiple Choice

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The term applied to the amount of cost to transfer to expense resulting from a decline in the utility of intangible assets is

On June 1, 2014, Aaron 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 and 30,000 hours. Using straight line depreciation, calculate depreciation expense for the last year.

Equipment was acquired at the beginning of the year at a cost of $75,000. The equipment was depreciated using the straight-line method based upon an estimated useful life of 6 years and an estimated residual value of $7,500.

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

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.

When determining whether to record an asset as a fixed asset, what two criteria must be met?

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.

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

Equipment with a cost of $160,000, an estimated residual value of $40,000, and an estimated life of 15 years was depreciated by the straight-line method for 4 years. Due to obsolescence, it was determined that the useful life should be shortened by 3 years and the residual value changed to zero. The depreciation expense for the current and future years is

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

The units of production depreciation method provides a good match of expenses against revenue.

When a property, plant, and equipment asset is sold for cash, any gain or loss on the asset sold should be recorded.

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

Intangible assets differ from property, plant and equipment assets in that they lack physical substance.

Xtra Company purchased goodwill from Argus for $96,000. Argus had developed the goodwill over 12 years. How much would Xtra amortize the goodwill for its first year?

Machinery was purchased on January 1, 2010 for $51,000. The machinery has an estimated life of 7 years and an estimated salvage value of $9,000. Double-declining balance depreciation for 2011 would be

Which of the following is included in the cost of constructing a building?

When a company replaces a component of property, plant and equipment, which statement below does not account for one of the steps in the process?