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Exam 7: Long-Term Assets

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Question 61

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A machine has a cost of $15,000,an estimated residual value of $3,000,and an estimated useful life of four years.The machine is being depreciated on a straight-line basis.At the end of the second year,what amount will be reported for accumulated depreciation?

A) $9,000.
B) $6,000.
C) $7,500.
D) $3,000.

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

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Question 62

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Which of the following statements is true regarding the amortization of intangible assets?

A) The expected residual value of most intangible assets is zero.
B) The service life of an intangible asset is always equal to its legal life.
C) Intangible assets with a limited useful life are not amortized.
D) In recording amortization,an accumulated amortization account is always used.

E) A) and B)
F) All of the above

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Question 63

Multiple Choice

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Wilson Inc.owns equipment for which it paid $70 million.At the end of 2012,it had accumulated depreciation on the equipment of $12 million.Due to adverse economic conditions,Wilson's management determined that it should assess whether an impairment should be recognized for the equipment.The estimated future cash flows to be provided by the equipment total $60 million,and its fair value at that point totals $50 million.Under these circumstances,Wilson:

Abbott Company purchased a computer that cost $10,000.It had an estimated useful life of 5 years and no residual value.The computer was depreciated by the straight-line method and was sold at the end of the fourth year of use for $3,000 cash.Abbott should record:

We record a loss if we sell an asset for less than book value.

Which of the following intangible assets is not amortized?

Leonard's Jewelry owns a patent with a carrying value of $50 million at the end of 2012.Due to adverse economic conditions,Leonard's management determined that it should assess whether an impairment should be recognized for the patent.The estimated future cash flows to be provided by the patent total $43 million,and its fair value at that point totals $35 million.Under these circumstances,Leonard:

International accounting standards allow firms to record development costs that benefit future periods as an intangible asset.

Depreciation in accounting is the process of allocating to expense the cost of an asset over its service life.

An exclusive 20-year right to manufacture a product or to use a process is a:

A trademark is a word,slogan,or symbol that distinctively identifies a company,product,or service.

Northwest Catering owns and operates several restaurant services in Oregon,Washington,and Idaho.One restaurant chain has experienced sharply declining profits.The company's management has decided to test the operational assets of the restaurants for possible impairment.The relevant information for these assets is presented below: Determine the amount of the impairment loss,if any. $\begin{array}{lr}\text { Book value } & \$ 4.5 \text { million } \\\text { Estimated total future cash flows } & 5.0 \text { million } \\\text { Fair value } & 3.5 \text { million }\end{array}$

The balance sheet of Hidden Valley Farms reports total assets of $450,000 and $550,000 at the beginning and end of the year,respectively.The return on assets for the year is 10%.What is Hidden Valley's net income for the year?

Accounting for impairment losses:

Using the straight-line method,the book value at December 31,2012 would be:

We expense internally generated intangible assets,such as research and development and advertising costs,as we incur them.

Oregon Adventures purchased equipment at the beginning of 2012 for $80,000.They sold the equipment at the end of 2014 for $45,000.If the expected life of the equipment was seven years with a residual value of $10,000,and they use straight-line depreciation,which of the following is true regarding the entry to record the sale of the equipment?

With the straight-line depreciation method,we allocate an equal amount of the depreciable cost to each year of the asset's service life.

The legal life of a patent is:

The factors used to compute depreciation expense are an asset's: