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Exam 8: Long-Term Assets

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Question 71

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On April 1, 2010, SAS Corp. purchased and placed in service a plant asset. The following information is available regarding the plant asset: $\begin{array} { | l | r | } \hline \text { Acquisition cost } & \$ 130,000 \\\hline \text { Estimated salvage value } & \$ 15,000 \\\hline \text { Estimated useful life } & 5 \text { years } \\\hline\end{array}$ Make the necessary adjusting journal entries at December 31, 2010 and December 31, 2010 to record depreciation for each year under the following depreciation methods: a. Straight-line b. Double-declining-balance.

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Question 72

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A plant asset's useful life might not be the same as its productive life.

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Question 73

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A company had a bulldozer destroyed by fire. The bulldozer originally cost $125,000. The accumulated depreciation on it was $60,000. The proceeds from the insurance company were $90,000. The company should recognize:

An assets' cost includes all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use.

_________________________ are capital expenditures that make a plant asset more productive; they often involve adding a component to an asset or replacing one of its old components with a better one and do not always increase an asset's life.

The most frequently used method of depreciation is the straight-line method.

The formula for computing annual straight-line depreciation is:

A company had net sales of $230,000 for 2010 and $288,000 for 2011. The company's average total assets for 2010 were $150,000 and $180,000 for 2011. Calculate the total asset turnover for each year and comment on the company's efficiency in the use of its assets.

Amortization:

Plant assets refer to intangible assets that are used in the everyday operations of a business.

A machine was purchased for $37,000 and depreciated for five years on a straight-line basis under the assumption it would have a ten-year life and a $1,000 salvage value. At the beginning of the machine's sixth year it was recognized the machine had three years of remaining life instead of five and that at the end of the remaining three years its salvage value would be $1,600. What amount of depreciation should be recorded in each of the machine's remaining three years?

Depreciation measures the actual decline in market value of an asset.

Revenue expenditures are additional costs of plant assets that materially increase the assets' life or productive capabilities.

The going concern principle supports the reporting of plant assets at book value rather than market value.

Both the straight-line depreciation method and the double-declining-balance depreciation method:

On April 1 of the current year, a company disposed of an automobile that had cost $20,000. The auto had a salvage value of $2,000 and a useful life of 5 years. The accounting records showed accumulated depreciation for this automobile of $8,100 as of April 1 of the current year. The asset was discarded after an accident occurred and $10,500 cash was received from an insurance claim. Prepare the journal entry to record the disposal of the automobile.

Assume Sambazon.com sold an acai processing machine for $172,000 cash. If accumulated depreciation on the sale date was $58,311 and a gain of $6,721 was recognized on the sale, what was the original cost of the asset?

Plant assets are:

The purchase of a property that included land, building and improvements is called a lump-sum purchase.

Revenue expenditures: