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Exam 7: Long-Term Assets

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Question 41

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Berry Co. purchases a patent on January 1, 2012, for $40,000 and the patent has an expected useful life of five years with no residual value. Assuming Berry Co. uses the straight-line method, what is the amortization expense for the year ended December 31, 2013?

A) $0.
B) $8,000.
C) $16,000.
D) $40,000.

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

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Question 42

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Asset turnover is net sales divided by ending total assets.

A) True
B) False

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Question 43

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Which of the following would be recorded as land improvements?

Which of the following intangible assets is not amortized?

ACME Drilling is evaluating an off-shore oil drilling platform for possible impairment. They estimate the following: book value, $18.5 million; fair value, $12 million; sum of estimated future cash flows generated from the oil drilling platform, $16 million. What amount of impairment loss, if any, should they record?

The following financial information is from Cook Company: $\begin{array} { | l | r | } \hline \text { Accounts Payable } & \$ 55,000 \\\hline \text { Land } & \$ 90,000 \\\hline \text { Inventory } & \$ 10,500 \\\hline \text { Accounts Receivable } & \$ 7,500 \\\hline \text { Equipment } & \$ 8,000 \\\hline \text { Unearned Revenue } & \$ 58,500 \\\hline \text { Short-term Investments } & \$ 20,000 \\\hline \text { Notes Receivable (due in 8 months) } & \$ 45,500 \\\hline \text { Interest Payable } & \$ 2,000 \\\hline \text { Patents } & \$ 75,000 \\\hline\end{array}$ What is the amount of long-term assets assuming the accounts above reflect normal activity?

Maple Inc. has the following information regarding its assets: $\begin{array} { | l | l | l | l | } \hline & \begin{array} { l } \text { Book } \\\text { Value }\end{array} & \begin{array} { l } \text { Estimated } \\\text { Cash Flows }\end{array} & \begin{array} { l } \text { Fair } \\\text { Value }\end{array} \\\hline \text { Equipment } & \$ 35,000 & \$ 30,000 & \$ 28,000 \\\hline \text { Building } & \$ 68,000 & \$ 70,000 & \$ 65,000 \\\hline \text { Patent } & \$ 30,000 & \$ 34,000 & \$ 32,000 \\\hline\end{array}$ What amount of loss should be recorded due to asset impairments?

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?

During 2012 and 2013, Supplies, Inc. drove the truck 15,000 and 22,000 miles, respectively, to deliver merchandise to its customers. The company originally purchased the truck at the beginning of 2012 for $175,000. If the truck has an estimated life of 10 years and 300,000 miles, with an estimated residual value of $25,000, what amount of depreciation expense should Supplies, Inc. record in 2013 using the activity method?

Which depreciation method is most common for financial reporting? Which depreciation method is most common for tax reporting? Why do companies choose these methods?

Listed below are five terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term placing the number designating the term in the space provided.

Gains on the sale of fixed assets for cash:

Using the double-declining balance method, depreciation expense for 2013 would be:

Depreciation in accounting records the decrease in value of an asset.

Crestview Estates purchased a tractor on January 1, 2012, for $65,000. The tractor's useful life is estimated to be 30,000 miles and has a residual value of $5,000. If Crestview used the tractor 5,000 miles in 2012 and 3,000 miles in 2013, what is the balance for accumulated depreciation at the end of 2013 using the activity method?

In accounting, goodwill

Bricker Enterprises purchased a machine for $100,000 on October 1, 2012. The estimated service life is ten years with a $10,000 residual value. Bricker records partial-year depreciation based on the number of months in service. Depreciation expense for 2012, using straight-line, is:

If the defense of an intangible right is unsuccessful, then the firm should expense the litigation costs as incurred because they provide no future benefit.

In an activity-based depreciation method, we allocate an asset's cost based on its use.

The amount of impairment loss is the excess of book value over: