Question 1

A company purchased a music distributor's collection of lyrics and songs for $1,425,000. The copyrights are expected to last another 30 years. Prepare the journal entry to record the amortization expense for the first year.

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Question 2

A company purchased mining property for $1,560,000. The property was estimated to contain 13,000,000 tons of ore. In the current year, the company removed and sold 247,000 tons of ore. Calculate the depletion expense for the current year.

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Question 3

During the current year, a company exchanged an old truck costing $58,000 with accumulated depreciation of $52,000 for a new truck. The new truck had a cash price of $80,000 and the company received a $16,000 trade-in allowance on the old truck with the balance of $64,000 paid in cash. Prepare the journal entry to record the exchange.
$$\begin{array} { | l | r | r | } 
\hline \text { Market value of new truck } & & \$ 80,000 \
\hline \text { Book value of old truck } ( \$ 58,000 - \$ 52,000 ) & \$ 6,000 & \
\hline \text { Cash paid in the exchange } & 64,000 & 70,000 \
\hline \text { Gain (not recorded) } & & \underline { \$ 10,000 } \
\hline & & \
\hline \text { Book value of old truck } & \$ 6,000 & \
\hline \text { Cash paid in the exchange } & \underline { 64,000 } & \
\hline \text { Cost recorded for new truck } & \$ 70,000 & \
\hline
\end{array}$$

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Question 4

During the current year, a company acquired a new computer with a cash price of $12,800 by exchanging an old one on which the company received a $1,500 trade-in allowance (with the balance of $11,300 paid in cash). The old computer cost $9,000 and its accumulated depreciation was $5,500 as of the exchange date. Prepare the journal entry to record the exchange.
$$\begin{array} { | l | r | r | } 
\hline \text { Computer (new) } & 12,800 & \
\hline \text { Accumulated Depreciation - Computer (old) } & 5,500 & \
\hline \text { Loss on Exchange of Computers } & 2,000 & \
\hline \text { Computer (old) } & & 9,000 \
\hline \text { Cash } & & 11,300 \
\hline
\end{array}$$

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Question 5

A company purchased a computer system on January 1, 2009, for $1,600,000. Prepare the journal entries to record depreciation for the first 6 months of 2011 and the sale of the computer assuming it is sold on July 1, 2011, for $1,000,000 cash. The straight-line method of depreciation was used based on an expected life of six years and a salvage value of $130,000.

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Question 6

A company purchased equipment for $325,000 on January 2, 2010. The company expects the equipment to last for eight years or 60,000 hours of operation, with an estimated salvage value of $25,000. During 2010, the equipment was in operations for 8,000 hours, while in 2011 the equipment was in operations for 8,700 hours. Compute the depreciation expense relating to the equipment for 2010 and 2011 using the following depreciation methods:
a. Straight-line
b. Double-declining-balance
c. Units-of-production.

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Question 7

A company purchased a machine on January 1 of the current year for $750,000. Calculate the annual depreciation expense for each year of the machine's life (estimated at 5 years or 20,000 hours, with a salvage value of $75,000). During the machine's 5-year life its hourly usage was: 3,000; 4,000; 5,000; 5,000; and 3,000 hours.
 $$\begin{array} { | c | l | l | l | } 
\hline \text { Year } & \text { Straight-Line } & \begin{array} { c } 
\text { Units-of- } \
\text { Production }
\end{array} & \begin{array} { c } 
\text { Double- } \
\text { Declining- } \
\text { Balance }
\end{array} \
\hline \text { Year 1 } & \$ & \$ & \$ \
\hline \text { Year 2 } & & & \
\hline \text { Year 3 } & & & \
\hline \text { Year 4 } & & & \
\hline \text { Year 5 } & & & \
\hline \text { Totals } & & & \
\hline
\end{array}$$

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Question 8

Mason Company sold a piece of equipment for $25,000 cash on December 31 after recording the annual depreciation on the asset. The equipment had an original cost of $92,500 and accumulated depreciation of $60,000. Prepare the general journal entry to record the sale of this asset.

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Question 9

A company sold for $40,000 cash a machine that originally cost $90,000. The accumulated depreciation on this machine was $47,000 at the time of the sale. What was the company's gain or loss on this sale?

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Question 10

On January 2 of the current year, a company purchased a patent for $35,000 with a useful life of 10 years. Prepare the journal entry to amortize the patent at the end of the first year.

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Question 11

A company purchased a leasehold property for $8,400,000. The leasehold expires in 15 years. Prepare the journal entry to record the first year's amortization expense.

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Question 12

A company purchased mining property containing 7,350,000 tons of ore for $1,837,500. In 2009 it mined and sold 857,000 tons of ore and in 2010 it mined and sold 943,000 tons of ore. Calculate the depletion expense for 2009 and 2010. What was the book value of the property at the end of 2010?

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Question 13

The original cost of a machine was $60,000. After $45,000 of depreciation was recorded, the machine was traded in on a new machine of like purpose priced at $75,000. A $10,500 trade-in allowance was received on the old machine and the balance of $64,500 was paid in cash. Prepare the general journal entry to record this trade-in.

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Question 14

A company exchanged its used machine for a new machine. The old machine cost $70,000 and the new one had a cash price of $95,000. The company had taken $60,000 depreciation on the old machine and was allowed a $2,500 trade-in allowance and the balance of $92,500 was paid in cash. What gain or loss should be recorded on the exchange?

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Question 15

A company paid $314,000 for a machine that was expected to last five years and have a salvage value of $40,000. During the third year of the machine's life, $37,000 cash was paid for replacement parts that were expected to increase the machine's productivity by 10% each year. Prepare the journal entry to record the $37,000 cost incurred in the third year.

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Question 16

On April 1, 2010, a company discarded a computer that cost $15,000 and that had a useful life of 4 years and a salvage value of $1,000. Using straight-line depreciation, the accumulated depreciation as of December 31, 2009 was $10,700.
a. Prepare the journal entry to record depreciation up to the date of disposal of the computer
b. Prepare the journal entry to record the disposal of the computer.

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Question 17

A company purchased mining property that containing 15,000,000 tons of ore for $4,875,000. In 2009, the company mined and sold 789,000 tons of ore and in 2010, it mined and sold 1,235,000. Calculate the depletion expense for 2009 and 2010.

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Question 18

A company exchanged an old truck for a newer model. The old truck account had a cost of $76,000 and Accumulated depreciation of $65,000 as of the exchange date. The new truck had a cash price of $84,000, but the company was given a $15,000 trade-in allowance and the balance of $69,000 was paid in cash. Prepare the journal entry to record the exchange.
 $$\begin{array} { | l | r | r | } 
\hline \text { Market value of new truck } & & \$ 84,000 \
\hline \text { Book value of old truck } ( \$ 76,000 - \$ 65,000 ) & \$ 11,000 & \
\hline \text { Cash } & \underline { 69,000 } & \underline { 80,000 } \
\hline \text { Gain (not recorded) } & & \underline { \$ 4,000 } \
\hline & & \
\hline \text { Book value of old truck } & \$ 11,000 & \
\hline \text { Cash paid in the exchange } & 69,000 & \
\hline \text { Cost recorded for new truck } & \underline { \underline { \$ 80,000 } } & \
\hline
\end{array}$$

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The answer of A company exchanged an old truck for...

Question 19

A company had a building destroyed by fire. The building originally cost $650,000 and its accumulated depreciation as of the date of the fire was $300,000. The company received $400,000 cash from an insurance policy that covered the building and will use that money to help rebuild. Prepare the single journal entry to record the destruction of the building and the receipt of cash from the insurance company.

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Question 20

On April 1 of the current year, a company disposed of an automobile that had cost $20,000. The auto had a salvage value of $2,000 and a useful life of 5 years. The accounting records showed accumulated depreciation for this automobile of $8,100 as of April 1 of the current year. The asset was discarded after an accident occurred and $10,500 cash was received from an insurance claim.
Prepare the journal entry to record the disposal of the automobile.

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Quiz 8: Long-Term Assets