ACCT 217 Lecture 18: Reporting and Analyzing Long-Lived Assets pt. 3

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coralfrog569

20 Apr 2015

School

University of Calgary

Department

Accounting

Course

ACCT 217

Professor

Darrin Ambrose

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Document Summary

Acct 217- lecture #18-reporting and analyzing long-lived assets. Systematic allocation of the cost of property, plant and equipment over the. Purchase price plus costs required to get the asset ready for use plus estimated asset retirement costs. A process of cost allocation, not determining an asset"s fair value. Does not use or provide cash to replace the asset. The period of time that the asset is expected to be available for use, or. The number of units that the asset is expected to produce. Used by the majority of canadian publicly-traded companies. Used by companies where production is tied to a quantifiable number. Management chooses the method that best reflects the pattern of use of the. Estimated amount to be received at the end of the asset"s useful life. Depreciation methods economic benefits from that asset diminishes each year as accumulated depreciation increases the depreciation rate. Residual value is not included in the calculation.

Related Questions

Paper Printing Company purchased a copy machine for $65,000onJanuaryâ 1, 2010. The copy machine had an estimated useful life offive years or 1,000,000 copies. Paper Printing estimated the copyâmachine's salvage value to be $5,000. The company made 250,000copies in 2010 and 190,000 copies in 2011.Requirements

1. Calculate the depreciation expense for eachyear using the straight line method.

		-		=		/		=	Depreciation expense
		-		=		/		=

Now we can determine the depreciation per unit. â(Round to twodecimalâ places.)

		/		=	Cost per copy
		/		=

Now that the cost per unit has been established we can nowdepreciate the copy machine based on the number of copiesproduced.

Year	x	=	Depreciation expense
2010	x	=
2011	x	=

2. Which method portrays the actual use of thisasset moreâ accurately? Explain your answer. When usingâstraight-line depreciation the depreciation expense

â¼

is higher at the end of life of the asset is lower at the end ofthe life of the asset remains the same every year . âStraight-linedepreciation assumes that the asset will be used

â¼

equally less more every year. Activity depreciation is alsoknown as

â¼

units of production straight line double declining balance . Theactivity method depends on the

â¼

actual estimated number of units produced.

orchidspider389

Question 1Acompany purchased for cash a machine with a list price of $90,000.The machine was shipped FOB shipping point at a cost of $5,000.Installation and test runs of the machine cost $3,000. Therecorded acquisition costof the machine is whichamount?

1	$98,000
2	$128,000
3	$90,000
4	$93,000

Question 2Small, ordinary repairs made to keepa truck running over its useful life have been debited to theVehicles account. As a result of this, which of the followingoccurred?

1	The balance in the Vehicles account was correctly stated.
2	The balance in the Vehicles account was overstated.
3	The expenses for the period were overstated.
4	The net income for the period was understated.

Question 3 Whatis the annual straight-linedepreciation for an asset thatcost $34,600, has an estimated service life of 8 years, and anestimated salvage valueof $1,400?

1	$4,150
2	$1,450
3	$4,325
4	$4,500

Question 4An asset cost $50,000, has anestimated salvage valueof $1,500, and an estimated usefullife of 8 years. What is thedouble-declining-balance depreciationrate?

1	20.0%
2	25.0%
3	16.0%
4	32.5%

Question 5An asset having a four-year servicelife and a salvage valueof $5,000 was acquired for $45,000cash on June 20. Ignore the half-year convention and calculate the depreciation expense at the end of the first year, December 31?

1	$10,000, under the straight-line method
2	$22,500, under the double-declining-balance method
3	$7,000, under the straight-line method
4	$11,250, under the double-declining-balance method

Question 6 Publicly traded companies can use adepreciation method that does not conform to generallyaccepted accounting principles but is based on a declining-balancemethod. What is the name of this accelerated depreciation method?

1	Asset Cost Recovery Statement
2	Asset Cost Recognition System
3	Modified Accelerated Cost Recovery System
4	Accelerated Cost Recovery System

Question 7 OnJune 28, 2011, a business sold for$1,500 a plant assetthat cost $5,000.The asset had a 5-year useful life, nosalvage value, and had been used by the business sinceJanuary 1, 2008. Straight-linedepreciation was used. Thefiscal year ends on December 31. What was the result of selling theplant asset?

1	No gain or loss on the disposal of plant assets
2	A $1,000 gain on the disposal of plant assets
3	A $500 loss on the disposal of plant assets
4	A $500 unrecognized gain on the sale of a plant asset.

Question 8Your company currently is generatingnormal earnings that are equal to a 12% return on net identifiable assets of $450,000. A comparable company is generatingnormal earnings that are equal to 10% return on net identifiableassets of $450,000. What is the estimated goodwill ofyour company, when compared to the other company?

1	$90,000
2	$45,000
3	$9,000
4	$15,000

Question 9The Baker Mining Company acquired aniron ore deposit for $2,000,000. The company's geologist estimatedthe deposit to contain 1,500,000 tons of iron ore. At the end ofthe first year, 60,000 tons had been extracted. The end-of-yearjournal entry to record thedepletion of the iron ore wouldinclude which of the following?

1	A credit to Iron Ore Inventory of $45,000
2	A credit to Accumulated Depletion of $80,000
3	A debit to Iron Ore Inventory of $50,000
4	None the above, until all of the ore is extracted

Question 10 Which of the following are investing activities?

1	Selling a plant asset
2	Exchanging an old asset and cash for a new plant asset
3	Depreciating or amortizing an asset
4	Both (A) and (B)

peachraccoon492

1.The useful life of a plant asset is:

The length of time it is used productively in a company'soperations

Never related to its physical life

Its productive life, but not to exceed one year

Determined by the FASB

Determined by law

2. Depreciation:

Measures the decline in market value of an asset

Measures physical deterioration of an asset

Is the process of allocating to expense the cost of a plantasset

Is an outflow of cash from the use of a plant asset

Is applied to land

3. Plant assets are

Tangible assets used in the operation of a business that have auseful life of more than one accounting period

Current assets

Held for sale

Intangible assets used in the operations of a business that havea useful life of more than one accounting period

Tangible assets used in the operation of business that have auseful life of less than one accounting period

4. A company has net sales of $870,000 and average accountsreceivable of $174,000. What is its accounts receivable turnoverfor the period?

0.20

5.00

20.0

73.0

1,825

5. FICA taxes include:

Social Security taxes

Charitable giving

Employee income taxes

Unemployment taxes

6. Times interest earned is calculated by:

Multiplying interest expense times income

Dividing interest expense by income before interest expense

Dividing income before interest expense and any income tax byinterest expense

Dividing interest and income tax expense by income beforeinterest and income tax expense

7. Amortization:

Is the systematic allocation of the cost of an intangible assetto expense over its estimated useful life

Is the process of allocating to expense the cost of a plantasset to the accounting periods benefiting from its use

Is the process of allocating the cost of natural resources toperiods when they are consumed

Is an accelerated form of expensing an asset's cost

Is the same as depletion

8. A method of estimating bad debts expense that involves adetailed examination of outstanding accounts and their length oftime past due is the:

Direct write-off method

Aging of accounts receivable method

Percentage of sales method

Aging of investments method

Percent of accounts receivable method

9. A company purchased a tract of land for its natural resourcesat a cost of $1,500,000. It expects to mine 2,000,000 tons of orefrom this land. The salvage value of the land is expected to be$250,000. The depletion expense per ton of ore is:

$0.75

$0.625

$0.875

$6.00

$8.00

10. The matching principle requires:

That expenses be ignored if their effect on the financialstatements are less important than revenues to the financialstatement user

The use of the direct write-off method for bad debts

The use of the allowance method of accounting for bad debts

That bad debts be disclosed in the financial statements

That bad debts not be written off

11. Liabilities:

Must be certain

Must sometimes be estimated

Must be for a specific amount

Must always have a definite date for payment

Must involve an outflow of cash

12. In the accounting records of a defendant, lawsuits:

Are estimated liabilities

Should always be recorded

Should always be disclosed

Should be recorded if payment for damages is probable and theamount can be reasonably estimated

13. A contingent liability:

Is always of a specific amount

Is a potential obligation that depends on a future event arisingout of a past transaction or event

Is an obligation not requiring future payment

Is an obligation arising from the purchase of goods or serviceson credit

Is an obligation arising from a future event

14. Total asset turnover is calculated by dividing:

Gross profit by average total assets

Average total assets by gross profit

Net sales by average total assets

Average total assets by net sales

Net assets by total assets

15. If the times interest ratio:

Increases, then risk increases

Increases, then risk decreases

Is greater than 1.5, then the company is in default

Is less than 1.5, the company is carrying too little debt

16. Promissory notes that require the issuer to make a series ofpayments consisting of both interest and principal are:

Debentures

Discounted notes

Installment notes

Indentures

Investment notes

17. A company borrowed $300,000 cash from the bank by signing a5-year, 8% installment note. The present value factor for anannuity at 8% for 5 years is 3.9927. Each annuity payment equals$75,137. The present value of the note is:

$75,137

$94,013

$300,000

$375,685

18. A bond traded at 102

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ACCT 217 Lecture 18: Reporting and Analyzing Long-Lived Assets pt. 3

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