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Exam 10: Fixed Assets and Intangible Assets

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Question 1

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Accumulated Depreciation

A) is used to show the amount of cost expiration of intangibles
B) is the same as Depreciation Expense
C) is a contra asset account
D) is used to show the amount of cost expiration of natural resources

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

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Question 2

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On July 1st, Hartford Construction purchases a bulldozer for $228,000. The equipment has a 9 year life with a residual value of $16,000. Hartford uses units-of-production method depreciation and the bulldozer is expected to yield 26,500 operating hours. (a) Calculate the depreciation expense per hour of operation. (b) The bulldozer is operated 1,250 hours in the first year, 2,755 hours in the second year, and 1,225 hours in the third year of operations. Journalize the depreciation expense for each year.

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(a) Hourly depreciation is: 11ea8f91_7cc6_4571_b161_65fc507b9127_TB2085_00_TB2085_00_TB2085_00 (b) First year - 1,250 hours × $ 8 per hour = $10,000 11ea8f91_7cc6_4572_b161_cd37c2b5a6f5_TB2085_00_TB2085_00_TB2085_00 Second year - 2,755 hours × $ 8 per hour = $22,040 11ea8f91_7cc6_4573_b161_65f0cf468ce8_TB2085_00_TB2085_00_TB2085_00 Third year - 1,225 hours × $ 8 per hour = $ 9,800 11ea8f91_7cc6_6c84_b161_99e286b04d6e_TB2085_00_TB2085_00_TB2085_00

Question 3

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A machine costing $85,000 with a 5-year life and $5,000 residual value was purchased January 2, 2011. Compute depreciation for each of the five years, using the declining-balance method at twice the straight-line rate.

Long-lived assets that are intangible in nature, used in the operations of the business, and held for sale in the ordinary course of business are called fixed assets.

A fixed asset's estimated value at the time it is to be retired from service is called

The cost of new equipment is called a revenue expenditure because it will help generate revenues in the future.

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.

XYZ Co. incurred the following below costs related to the office building used in operating its sports supply company: Classify each of the costs as a capital expenditure or a revenue expenditure. For those costs identified as capital expenditures, classify each as an additional or replacement component.

Solare Company acquired mineral rights for $60,000,000. The diamond deposit is estimated at 6,000,000 tons. During the current year, 2,300,000 tons were mined and sold.

The most widely used depreciation method is

To a major resort, timeshare properties would be classified as property, plant and equipment.

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

Functional depreciation occurs when a fixed asset is no longer able to provide services at the level for which it was intended.

When a plant asset is traded for another similar asset, losses on the asset traded are recognized.

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

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

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 first year.

For each of the following fixed assets, determine the depreciation expense and the book value for the dates requested: Disposal date is N/A if asset is still in use. Method: SL = Straight Line; DDB = Double Declining Balance Assume the estimated life was 5 years for each asset.

Computer equipment was acquired at the beginning of the year at a cost of $65,000 that has an estimated residual value of $3,800 and an estimated useful life of 8 years. Determine the (a) depreciable cost, (b) straight-line rate, and (c) annual straight-line depreciation.

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