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Exam 9: Long-Lived Assets

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Question 121

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A higher trade-in value will increase the profit of the company disposing of an asset.

A) True
B) False

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Question 122

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The Bartallas Clinic purchased a new surgical laser for $75,000. The estimated residual value is $7,500. The laser has a useful life of four years and the clinic expects to use it 10,000 hours. It was used 1,600 hours in year 1; 2,100 hours in year 2; 3,400 hours in year 3; 2,900 hours in year 4. Instructions a. Calculate the annual depreciation for each of the four years under each of the following methods: i. straight-line ii. units-of-production b. If you were the administrator of the clinic, which method would you deem as most appropriate? Justify your answer. c. Which method would result in the lowest reported profit in the first year? Which method would result in the lowest total reported profit over the four-year period? d. Which method would result in the lowest cash flow in Year 1? Over the life of the asset?

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b. The units-of-production method can b...

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Question 123

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Krantz Company's delivery truck, which originally cost $28,000, was destroyed by fire. At the time of the fire, the balance of the accumulated depreciation account amounted to $19,000. The company received $16,000 reimbursement from its insurance company. The gain or loss as a result of the fire was

A company purchased factory equipment on June 1, 2014 for $48,000. It is estimated that the equipment will have a $6,000 residual value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2014 is

Depreciation is the process of allocating the cost of a long-lived asset (such as property, plant, and equipment) over its service life in a(n)

The four subdivisions for property, plant, and equipment are normally

Intangible assets are the rights and privileges that result from ownership of long-lived assets that

Dorchester Company purchased a new van for floral deliveries on July 1, 2014. The van cost $20,000 with an estimated life of 5 years and $5,000 residual value at the end of its useful life. The double diminishing-balance method of depreciation will be used. -What is the depreciation expense for 2014?

The cost of property, plant, and equipment includes all of the following items EXCEPT

Which of the following methods of calculating depreciation uses measures other than time?

Goodwill can be recorded

For the year ended December 31, 2014, Akito Co. has net sales of $1,000,000 and profit of $290,000. Total assets on January 1, 2014 were $1,750,000 and total assets at December 31, 2014 are $1,245,000. Akito's return on assets for 2014 is

Kabale Company purchased factory equipment with an invoice price of $92,000. Other costs incurred were freight costs, $2,500; installation of wiring and foundation, $2,200; material and labour costs in testing equipment, $700; oil lubricants and supplies to be used with equipment, $500; one-year fire insurance policy covering equipment, $1,400. The equipment is estimated to have an $8,000 residual value at the end of its 5-year useful service life. Instructions a. Calculate the acquisition cost of the equipment. Identify each element of cost clearly. b. If the double diminishing-balance method of depreciation was used, the constant percentage applied to a diminishing carrying amount would be __________.

A company purchased property for $300,000. The property included an acre of land valued at $50,000, a building valued at $150,000, and equipment valued at $125,000. -The land will be recorded at a cost of

A coal company invests $12 million in a mine estimated to have 20 million tonnes of coal and no residual value. It is expected that the mine will be in operation for 5 years. In the first year, 1,000,000 tonnes of coal are extracted and sold. What is the depreciation included in cost of goods sold for the first year?

Which of the following assets has indefinite life?

The cost of natural resources is NOT allocated to expense because the natural resources are replaceable only by an act of nature.

Revaluation model is allowed under IFRS mainly because it is useful in countries where

A company using the diminishing-balance method of depreciation will have higher profit in the early years of the asset.

Goodwill