Chapter 8 Homework Assignment

(CAPITAL) expenditures are additional costs of plant assets that provide benefits extending beyond the current period, such as a plant expansion, or machine overhaul. (PLANT) assets are assets used in a company’s operations that have a useful life of more than one accounting period. (PLANT) assets purchased as a group in a single transaction for a lump-sum price (also called a lumpsum, group, bulk, or basket purchase) are allocated the purchase price based on their relative market values. (REVENUE) expenditures are additional costs of plant assets that do not materially increase the asset’s life or productive capabilities. (SALVAGE) value, also called residual value or scrap value, is an estimate of the asset’s value at the end of its benefit period. __________ are assets that are physically consumed when used, such as mineral deposits and oil and gas fields. NATURAL RESOURCES __________ is measured as the excess of the cost of an acquired entity over the value of the acquired net assets. GOODWILL ___________ are expenditures that keep an asset in normal, good operating condition. They are necessary if an asset is to perform to expectations over its useful life. ORDINARY REPAIRS ___________ are nonphysical assets (used in operations) that confer on their owners long-term rights, or competitive advantages. INTANGIBLE ASSETS ___________ is the process of allocating the cost of a plant asset to expense in the accounting periods benefiting from its use. DEPRECIATION ___________ value, also called residual value or scrap value, is an estimate of the asset’s value at the end of its benefit period. SALVAGE A company owns an asset that is fully depreciated. The asset is no longer being used in operations and has no market value. The company has decided to __________ the asset by recording an entry to remove it from the balance sheet. DISCARD A company sells a machine that cost $7,000 for $500 cash. The machine had $6,500 accumulated depreciation. The entry to record this transaction will include which of the following entries? CREDIT TO MACHINERY FOR $7,000; DEBIT TO ACCUMULATED DEPRECIATION – MACHINERY FOR $6,500; DEBIT TO CASH FOR $500 A delivery van that cost $45,000 with accumulated depreciation of $15,000 is sold for $20,000. How much gain or loss will be recognized on this sale? $10,000 LOSS A plant asset is (DISCARDED) when it is no longer useful to the company, and it has no market value. A symbol, name, phrase or jingle identified with a company, product or service is called a (TRADEMARK) Accumulated depreciation is a (CONTRA) asset account (one that is linked with the plant asset account, but has an opposite normal balance) and is reported on the balance sheet. Accumulated depreciation is recorded on which of the following financial statements? BALANCE SHEET Alin Co. purchases a building for $300,000 and pays an additional $30,000 for closing costs (brokerage, title, attorney fees). Alin also pays $20,000 in renovations, including painting, carpet, lighting, etc. Alin should record the cost of the building at: $350,000 Arc Co. purchased a piece of equipment for $25,000. At the end of the year, the book value of the equipment is $12,000. The salvage value is 0. How much is the accumulated depreciation at the end of the period? $13,000 Assets that increase the benefits of land, have a limited useful life, and are depreciated—such as parking lots and street lights—are called: LAND IMPROVEMENTS Book value can be calculated by taking an asset’s acquisition cost less its (ACCUMULATED DEPRECIATION) Brice Co. purchases land in order to drill oil. This oil field would be classified as a(n) ___________ on the balance sheet. NATURAL RESOURCE Consistent with the ___________ principle, plant assets should be recorded at cost, which includes all the normal and reasonable expenditures necessary to get the asset in place and ready for its intended use. COST Depreciation expense is reported as a decrease in which of the following financial statements? INCOME STATEMENT Depreciation expense is reported on which of the following financial statements? INCOME STATEMENT Determine which of the following expenses are considered revenue expenditures related to a company vehicle. CAR WASH; DENT REPAIR; OIL CHANGE Determine which of the following expenses related to a building would be classifies as a capital expenditure. ROOM ADDITION; NEW AIR CONDIDITONING SYSTEM Forward Co. discarded a machine that cost $5,000 and was fully depreciated. The entry to record this transaction would include a credit to the ___________ account. MACHINERY Geo Co. purchased a building for $400,000. In addition, Geo paid $35,000 closing fees (including title and lawyer fees). Geo also paid $60,000 to modify the building, changing the layout specifically for Geo’s needs. Geo should record the building at: $495,000 Grand Co. owns one copier that was purchased for $10,000 three years ago. The depreciation expense taken on the copier each year has been $2,700; $1,800; and $2,200, based on the number of copies that have been made on the copier. Based on this information, the company uses the __________ depreciation method. UNITS-OF-PRODUCTION Ion Co purchased land for $190,000. Ion also paid $5,000 in brokerage fees, $1,000 in legal fees, and $500 in title costs. Ion should record the cost of this land to be: $196,500 Ironworks Co. sells a machine that cost $5,000 with a current book value of $1,500 for $2,000 cash. Ironworks will record a debit to which account and for how much? ACCUMULATED DEPRECIATION – EQUIPMENT FOR $3,500 Land (IMPROVEMENTS) are assets that increase the benefits of land, have a limited useful life, and are depreciated—such as walkways and fences. Martinez Co. sells a machine that cost $10,000 with accumulated depreciation of $8,000 for $2,000 cash. The entry to record this transaction will recognize a gain or loss of how much? THERE IS NO GAIN OR LOSS On December 31, Briar Co. disposed of a piece of equipment that cost $6,000 with accumulated depreciation of $4,500. The entry to record this disposal would include a debit to which account and for how much? LOSS ON DISPOSAL OF EQUIPMENT FOR $1,500 On January 2, Dice Co. purchases a mixing machine for $25,500. The machine is expected to last four years and have a salvage value of $5,500. Assuming the company uses the straight-line method, depreciation expense should be $5,000 PER YEAR On January 3, ATA Company purchases a copy machine for $11,500. The machine is expected to last five years and have a salvage value of $1,500. Compute depreciation expense for the first year, assuming the company uses the straight-line method. $2,000 On June 1, Harding Co. purchased a machine for $14,000 and estimates it will use the machine for five years with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine’s first year (partial) depreciation expense for June 1 st through December 31st. $1,400 On October 30, Cleo Co. purchased a machine for $26,000 and estimates it will use the machine for fouryears with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine’s first year partial depreciation expense for October 30 through December 31. $1,000 Ordinary repairs, such as repairs and maintenance to a vehicle, would be recorded with a debit to which of the following accounts? REPAIRS EXPENSE Plant assets should be recorded at cost, including all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use. This would include which of the following costs? SHIPPING CHARGES; TESTING; ASSEMBLING Privo Co. purchases a machine that cost $15,000. Privo estimates a 5-year life with no salvage value. The first three years of depreciation expense are $6,000; $3,600; and $2,160, respectively. Based on this information, Privo is using the __________ method. DECLINING BALANCE PT Co. purchased land and an existing building for $200,000. In addition, PT paid closing costs of $15,000. PT removed the building and regraded the land for a total cost of $35,000. PT should record the land for: $250,000 Ring Co. owns a delivery van that was purchased two years ago for $25,000. Ring has depreciated the van for two years at a straight-line amount of $4,000 per year. The book value of this van at the end of the second year would be $17,000 Sangmoon Co. sells equipment for $1,000 cash. The equipment cost Sangmoon $6,500 and is fully depreciated at the time of sale and has no salvage value. Sangmoon will record the sale with a credit to which account and for how much? GAIN ON SALE OF EQUIPMENT FOR $1,000 Straight-line depreciation can be calculated by taking: (COST – SALVAGE VALUE)/USEFUL LIFE T. Chung Co. sold a computer for $500 cash. The computer cost $3,000 and had accumulated depreciation of $2,200 at the time of the sale. Chung will record the sale with an entry to the (LOSS) on Disposal of Equipment account in the amount of ($300) The (USEFUL) life (also called service life) is the length of time the asset is productively used in the company’s operations. The ___________ life of a plant asset is the length of time it is productively used in a company’s operations. USEFUL The amount by which a company’s value exceeds the value of its individual assets and liabilities is called (GOODWILL) The asset’s acquisition cost less its accumulated depreciation is called: BOOK VALUE The cost at which a company records purchases of machinery and equipment should include which of the following? IINSTALLATION; TAXES; PURCHASE PRICE; SHIPPING FEES The cost of a plant asset includes the following: COST TO PREPARE IT FOR USE; PURCHASE PRICE The depreciation method that determines the depreciation charge for the period by multiplying a depreciation rate (often twice the straight-line rate) by the asset’s beginning-period book value is known as the ___________ method. DECLINING-BALANCE The exclusive right to publish or sell a musical, literary, or artistic work during the life of the creator plus 70 years is called a COPYRIGHT The factors necessary to compute depreciation include (COST), salvage value, and useful life. The factors necessary to compute depreciation include all of the following, except: BOOK VALUE The method of depreciation that charges a varying amount to depreciation expense for each period of an asset’s useful life depending on its usage is called the __________ method. UNITS-OF-PRODUCTION The purchase of multiple plant assets for one purchase price is called a ________ purchase. LUMP-SUM Tops Co. purchases equipment for $12,000 and has been using straight-line depreciation, estimating a 5year life and $500 salvage value. At the beginning of the third year, Tops decides to use the equipment for a total of 6-years with no salvage value. Compute the revised depreciation for the third year. $1,850 Trio Co. reported that maintenance and repair costs are expensed as incurred. If Trio’s current year machinery and equipment repair costs are $8,200, which accounts would be impacted to complete the journal entry? CREDIT CASH; DEBIT REPAIRS EXPENSE True or false: The cost of a plant asset consists of all necessary and reasonable expenditures to acquire it and prepare it for its intended use. TRUE Wen Co. purchased a building for $200,000. Wen paid $20,000 in lawyer and title fees. Wen also paid an additional $15,000 to modify the building in order to accommodate his business needs. Wen should record the cost of the building at: $235,000 When a company revises an estimate used to record depreciation expense, the company should revise depreciation by using the formula (_________ - revised salvage value)/revised remaining useful life. BOOK VALUE When considering the sale of a plant asset, match the following outcomes to the appropriate situations. BOOK VALUE IS GREATER THAN THE SELLING PRICE LOSS ON SALE OF ASSET; BOOK VALUE IS LESS TH THE SELLING PRICE GAIN ON SALE OF ASSET; BOOK VALUE IS EQUAL TO THE SELLING PRICE NO GAIN OR LOSS RECOGNIZED Which of the following assets are not considered intangible assets? COPY MACHINE; MINERAL DEPOSIT Which of the following expenses would not be considered an ordinary repair? REPLACING AN ENGINE Which of the following items are plant assets? EQUIPMENT BEING USED IN OPERATIONS; BUILDING BEING USED FOR OPERATIONS Which of the following items related to depreciating equipment would be found on a company’s income statement? DEPRECIATION EXPENSE—EQUIPMENT Which of the following situations will result in recognizing a gain on sale of a plant asset? A FULLY DEPRECIATED ASSET IS SOLD FOR $1,000 Wyatt Co. purchased a popular symbol that doubled its sales in the first year. The cost of this symbol is an asset called a: TRADEMARK Zen Co. sells a copier machine for $2,000. The copier cost Zen $6,000 and at the time of sale, accumulated depreciation was $2,500. Zen will record this sale with which of the following entries? DEBIT TO LOSS ON DISPOSAL OF MACHINERY FOR $1,500