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Exam 8: Accounting for Long-Term Operational Assets

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Question 51

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Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts.Enter only one letter for each element. -The Baltimore Company acquired the Chesapeake Company for $650,000 cash.Chesapeake's assets had been appraised at $660,000.At the time of sale Chesapeake's accounting records showed total assets of $590,000,liabilities of $180,000 and equity of $410,000.How would the purchase affect Baltimore's financial statements?

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Question 52

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On September 10,2016,Farmer Company sold a piece of equipment for $6,000.The equipment had an original cost of $34,000 and accumulated depreciation of $31,000 at the time of the sale.Which of the following correctly shows the effect of the sale on the 2016 financial statements?

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Question 53

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Which of the following would not be classified as a tangible long-term asset?

The balance sheet of Flo's Restaurant showed total assets of $600,000,liabilities of $160,000 and equity of $540,000.An appraiser estimated the fair value of the restaurant assets at $680,000.If Alice Company pays $770,000 cash for the restaurant the amount of goodwill acquired would be:

On January 1,2016,the Dartmouth Corporation paid $18,000 for major improvements on a two-year-old manufacturing machine.Although the expenditure did not change the expected useful life,it greatly increased the productivity of the machine.Prior to this transaction,the machine account in the general ledger was listed at $84,000,and the accumulated depreciation account was $20,000.Dartmouth uses the straight-line depreciation method.The estimated useful life was six years,and the estimated salvage value was $4,000. Required: a)Prepare the entry in general journal form for the January 1,2016 transaction. b)Immediately after the January 1,2016 transaction,what is the book value of the asset on Dartmouth books? c)Compute the depreciation for the machine for December 31,2016.

On January 1,2015,Li Company purchased an asset that cost $80,000.The asset had an expected useful life of five years and an estimated salvage value of $16,000.Li uses the straight-line method for the recognition of depreciation expense.At the beginning of the fourth year of usage,the company revised its estimated salvage value to $8,000.Based on this information,the amount of depreciation expense to be recognized at the end of 2018 is:

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts.Enter only one letter for each element. -Gulfshore Oil Company recognized $2,000,000 of depletion expense related to an oil reserve.How does this entry affect Gulfshore's financial statements?

On January 6,2016,the Mount Jackson Corporation purchased a tract of land for a factory site for $1,500,000.An existing building on the site was demolished and the new factory was completed on October 11,2016.Additional cost data are shown below: Which of the following correctly states the capitalized cost of the (a) land and (b) the new building?

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts.Enter only one letter for each element. -The Baker Company purchased an asset on January 1,2016 for $200,000.The asset had a $50,000 salvage value and a 10 year life.The asset was sold on January 1,2018 for $174,000.Show how the sale will affect Baker's financial statements,assuming that Baker uses straight-line depreciation.

Describe what is meant by the term "goodwill."

Expenditures that extend the useful life of a plant asset are debited to the asset account.

On March 1,Bartholomew Company purchased a new stamping machine with a list price of $34,000.The company paid cash for the machine;therefore,it was allowed a 5% discount.Other costs associated with the machine were: transportation costs,$550;sales tax paid,$1,360;installation costs,$450;routine maintenance during the first month of operation,$500.The cost recorded for the machine was:

Chico Company paid $950,000 for a basket purchase that included office furniture,a building and land.An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Office furniture - $190,000;Building - $740,000,Land - $132,000.Based on this information,and rounding allocations to two decimal places,the amount of cost that would be allocated to the office furniture is closest to:

Flagler Company purchased equipment that cost $90,000.The equipment had a useful life of 5 years and a $10,000 salvage value.Flagler used the double-declining-balance method to depreciate its assets.Which of the following choices accurately reflects how the recognition of the first year's depreciation would affect the company's financial statements?

Use the following to answer questions Harding Corporation acquired real estate that contained land,building and equipment.The property cost Harding $1,900,000.Harding paid $350,000 and issued a note payable for the remainder of the cost.An appraisal of the property reported the following values: Land,$374,000;Building,$1,100,000 and Equipment,$726,000. -What value will be recorded for the building?

In 2016,Hinkle Corporation Co.acquired a patent from a competitor for $275,000.At the time of purchase,it had 12 years of its legal life remaining;however,due to competition,Hinkle believes that the patent will only be useful for 8 years.Prepare the general journal entry to recognize amortization expense for 2016.

On January 1,2016,Friedman Company purchased a truck that cost $48,000.The truck had an expected useful life of 8 years and an $8,000 salvage value.The book value of the truck at the end of 2016,assuming that Friedman uses the double declining balance method,is:

Which of the following terms is used to identify the expense recognition for intangible assets?

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts.Enter only one letter for each element. -Shelton Robotics Company amortized $30,400 of patent cost.How does this entry affect Shelton's financial statements?

On January 1,2016,Stiller Company paid $800,000 to obtain a patent.Stiller expected to use the patent for 5 years before it became technologically obsolete.The remaining legal life of the patent was 8 years.Based on this information,the amount of amortization expense on the December 31,2018 income statement and the book value of the patent on the December 31,2018 balance sheet would be: