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Exam 8: Accounting for Long-Term Operational Assets

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Question 81

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Assume that Wu Company earned $15,000 cash revenue and incurred $9,500 in cash expenses in 2015. Using straight-line depreciation and assuming that the office equipment was sold on 12/31/15 for $8,000, the amount of net income or (loss) appearing on the December 31, 2015 income statement would be:

A) ($3,300) .
B) $300.
C) $2,700.
D) $3,100.

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

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Question 82

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Which of the following correctly shows the effect of the first year's amortization of Raymond's copyright?

A) Option A
B) Option B
C) Option C
D) Option D

E) A) and C)
F) None of the above

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Question 83

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Allen Company paid cash to prolong the life of one of its assets. Which of the following choices accurately reflects how this event would affect Allen's financial statements?

On March 1, Bunker Hill Company purchased a new stamping machine with a list price of $68,000. The company paid cash for the machine; therefore, it was allowed a 5% discount. Other costs associated with the machine were: transportation costs, $1,100; sales tax paid, $2,720; installation costs, $900; routine maintenance during the first month of operation, $1,000. The cost recorded for the machine was:

Indicate whether each of the following statements regarding accounting for long-term assets is true or false. _____ a) Other things being equal, the lower a company estimates the salvage value of a plant asset to be, the lower the company's net income will be. _____ b) Depreciation expense is an example of a "non-cash" expense. _____ c) A company cannot use the double declining method of depreciation for financial statements while using the straight-line method of depreciation for tax returns. _____ d) The book value of an asset is the amount a company believes it is worth (its fair market-value) as of the date of the balance sheet. _____ e) MACRS is not an acceptable way of computing depreciation expense under GAAP.

Indicate whether each of the following statements is true or false. _____ a) Sales taxes paid on the purchase of equipment would be expensed in the year of the purchase. _____ b) Real estate fees and attorney's fees related to the purchase of a building would be added to the cost of the building. _____ c) Payment of a fine for improper burning of a demolished building would be added to the land account. _____ d) Delivery charges on equipment would be added to the equipment account. _____ e) The matching concept requires that plant assets be recorded at the amount paid for the assets.

An impairment of an intangible asset reduces the asset, stockholders' equity, and net income.

On January 1, 2013, Juniper Manufacturing Company purchased equipment for $106,000. Juniper paid $2,000 to have the machine installed. The equipment is expected to have a 5 year useful life and a salvage value of $13,000. Required: a) At what dollar amount should this equipment be recorded in Juniper's accounting records? b) Compute depreciation expense for 2013 and 2014 using straight line depreciation. c) What is the book value at the beginning of 2015? d) Assume the equipment was sold on January 1, 2015, for $85,000. Compute the amount of gain or loss from the sale. e) Prepare the journal entry to record the sale of the equipment using the information in part d).

Which method of depreciation generally allocates the largest amount of depreciation to the first year of the asset's life?

The term used to recognize expense for property, plant, and equipment assets is depletion.

Which of the following intangible assets does not convey a specific legal right or privilege?

Why is land classified separately from other tangible long-term assets?

Goodwill is the value attributable to a business's ability to generate a high return.

The Harlow Company purchased the Hampton Company for $600,000 cash. The fair market value of Hampton's assets was $520,000, and the company had liabilities of $30,000. Which of the following choices would reflect the purchase on Harlow's financial statements?

Which of the following correctly shows the effect of Raymond's purchase of the copyright on the financial statements?

Sturgis Corporation purchased equipment on January 2, 2013 for $50,000. Sturgis used the straight-line method of depreciation with a $6,000 salvage value and a useful life of 5-years. On January 1, 2015 Sturgis sold this equipment for $35,000. Required: a) Calculate the gain or loss Sturgis should recognize from this sale. b) Prepare the journal entry to record the sale.

Intangible assets include patents, copyrights, and franchises.

Name three examples of property, plant and equipment.

When using the modified accelerated cost recovery system the highest amount of depreciation expense will be recognized in the year the asset is acquired.