Question 1

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?

Accepted Answer

The answer of A company exchanged its used machine for...

Question 2

On January 1, a company purchased a machine for $75,000 that had a six-year useful life and a salvage value of $6,000. After three years of straight-line depreciation, on January 1, 2013, the company paid $7,500 cash to improve the efficiency of the machine. The effect of the expenditure was to increase the productivity of the machine without increasing its remaining useful life or changing its salvage value. Straight-line depreciation is used throughout the machine's life.
a. Prepare the journal entry to record the $7,500 expenditure.
b. What amount of depreciation expense should be recorded for 2013?

Accepted Answer

The answer of On January 1, a company purchased a...

Question 3

On January 1, a machine costing $260,000 with a four-year life and an estimated $5,000 salvage value was purchased. It was also estimated that the machine would produce 500,000 units during its life. The actual units produced during its first year of operation were 110,000. Determine the amount of depreciation expense for the first year under each of the following assumptions:
a. The company uses the straight-line method of depreciation.
b. The company uses the units-of-production method of depreciation.
c. The company uses the double-declining-balance method of depreciation.

Accepted Answer

The answer of On January 1, a machine costing $260,000...

Question 4

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.

Accepted Answer

The answer of Mason Company sold a piece of equipment...

Question 5

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.

Accepted Answer

The answer of A company purchased a music distributor's collection...

Question 6

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.

Accepted Answer

The answer of A company purchased a leasehold property for...

Question 7

On April 1, 2013, a company discarded a computer that cost $15,000 and that had a useful life of four years and a salvage value of $1,000. Using straight-line depreciation, the accumulated depreciation as of December 31, 2012, 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.

Accepted Answer

The answer of On April 1, 2013, a company discarded...

Question 8

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.

Accepted Answer

The answer of A company paid $314,000 for a machine...

Question 9

A company purchased mining property that containing 15,000,000 tons of ore for $4,875,000. In 2012, the company mined and sold 789,000 tons of ore and in 2013, it mined and sold 1,235,000. Calculate the depletion expense for 2012 and 2013.

Accepted Answer

The answer of A company purchased mining property that containing...

Question 10

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.

Accepted Answer

The answer of The original cost of a machine was...

Question 11

A company purchased a computer system on January 1, 2012, for $1,600,000. Prepare the journal entries to record depreciation for the first six months of 2014 and the sale of the computer assuming it is sold on July 1, 2014, 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.

Accepted Answer

The answer of A company purchased a computer system on...

Question 12

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.

Accepted Answer

The answer of A company had a building destroyed by...

Question 13

A company recently paid $1,500,000 to buy a building with an estimated useful life of 20 years and a salvage value of $25,000. Calculate the depreciation expense for the third year after acquisition using the double-declining-balance depreciation.

Accepted Answer

The answer of A company recently paid $1,500,000 to buy...

Question 14

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 five years or 20,000 hours, with a salvage value of $75,000). During the machine's five-year life its hourly usage was: 3,000; 4,000; 5,000; 5,000; and 3,000 hours.

Accepted Answer

The answer of A company purchased a machine on January...

Question 15

A company purchased mining property containing 7,350,000 tons of ore for $1,837,500. In 2012 it mined and sold 857,000 tons of ore and in 2013 it mined and sold 943,000 tons of ore. Calculate the depletion expense for 2012 and 2013. What was the book value of the property at the end of 2013?

Accepted Answer

The answer of A company purchased mining property containing 7,350,000...

Question 16

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.

Accepted Answer

The answer of A company purchased mining property for $1,560,000....

Question 17

A company purchased equipment for $325,000 on January 2, 2013. 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 2013, the equipment was in operations for 8,000 hours, while in 2014 the equipment was in operations for 8,700 hours. Compute the depreciation expense relating to the equipment for 2013 and 2014 using the following depreciation methods:
a. Straight-line
b. Double-declining-balance
c. Units-of-production.

Accepted Answer

The answer of A company purchased equipment for $325,000 on...

Question 18

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 five 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.

Accepted Answer

The answer of On April 1 of the current year,...

Question 19

______________________ depreciation charges a varying amount to expense for each period of an asset's useful life depending on its usage.

Accepted Answer

The answer of ______________________ depreciation charges a varying amount to...

Question 20

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.

Accepted Answer

The answer of During the current year, a company exchanged...

Quiz 8: Accounting for Long-Term Assets