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Exam 10: Fixed Assets and Intangible Assets

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Question 41

Multiple Choice

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On December 31, Strike Company has decided to sell one of its batting cages. The initial cost of the equipment was $310,000 with an accumulated depreciation of $260,000. Depreciation has been taken up to the end of the year. The company found a company that is willing to buy the equipment for $20,000. What is the amount of the gain or loss on this transaction?

A) Gain of $20,000
B) Loss of $30,000
C) No gain or loss
D) Cannot be determined

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

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Question 42

Multiple Choice

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Equipment with a cost of $160,000, an estimated residual value of $40,000, and an estimated life of 15 years was depreciated by the straight-line method for 4 years. Due to obsolescence, it was determined that the useful life should be shortened by 3 years and the residual value changed to zero. The depreciation expense for the current and future years is

A) $11,636
B) $16,000
C) $11,000
D) $8,000

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

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Question 43

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Xtra Company purchased goodwill from Argus for $96,000. Argus had developed the goodwill over 12 years. How much would Xtra amortize the goodwill for its first year?

The cost of computer equipment does include the consultant's fee to supervise installation of the equipment.

Computer equipment was acquired at the beginning of the year at a cost of $57,000 that has an estimated residual value of $9,000 and an estimated useful life of 5 years. Determine the 2nd year's depreciation using straight-line depreciation.

Long lived assets held for sale are classified as fixed assets.

The cost of a patent with a remaining legal life of 10 years and an estimated useful life of 7 years is amortized over 10 years.

A copy machine acquired on March 1, 2011 with a cost of $1,410 has an estimated useful life of 3 years. Assuming that it will have a residual value of $150, determine the depreciation for the first and second year by the straight-line method. Straight-line depreciation = (cost-estimated residual value)/ estimated life Straight-line depreciation = ($1,410 - $150)/3 Straight-line depreciation = $420 per year

Capital expenditures are costs of acquiring, constructing, adding, or replacing property, plant and equipment.

Land acquired so it can be resold in the future is listed in the balance sheet as a(n)

Golden Sales has bought $135,000 in fixed assets on January 1st associated with sales equipment. The residual value of these assets is estimated at $10,000 after they service their 4 year service life. Golden Sales managers want to evaluate the options of depreciation. (a) Compute the annual straight-line depreciation and provide the sample depreciation journal entry to be posted at the end of each of the years. (b) Write the journal entries for each year of the service life for these assets using the double- declining balance method.

All leases are classified as either

Journalize each of the following transactions:

Patents are exclusive rights to manufacture, use, or sell a particular product or process.

Intangible assets differ from property, plant and equipment assets in that they lack physical substance.

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 second year.

Which of the following should be included in the acquisition cost of a piece of equipment?

Residual value is incorporated in the initial calculations for double-declining-balance depreciation.

When a company exchanges machinery and receives a trade-in allowance less than the book value, this transaction would be recorded with the following entry:

The acquisition costs of property, plant, and equipment should include all normal, reasonable and necessary costs to get the asset in place and ready for use.