Question 1

On June 30, 2019, Milch, Inc. sold some used equipment for $120,000. The equipment had been purchased several years ago for $260,000. Milch, Inc. properly recorded a $28,000 gain on the sale.
The accumulated depreciation on the equipment at the date of sale was:

Accepted Answer

$260,000 old equipment cost + $28,000 gain on sale - $120,000 cash received
= $168,000 accumulated depreciation

Question 2

On April 30, 2019, TWC & Brothers sold some used equipment for $84,000. The accumulated depreciation on the equipment when sold was $96,000. TWC & Brothers properly recorded a $33,000 gain on the sale.
The original cost of the equipment when it was purchased several years ago by TWC & Brothers must have been:

Accepted Answer

$84,000 cash + $96,000 accumulated depreciation - $33,000 gain on sale
= $147,000 original cost of equipment

Question 3

On April 30, 2019, Peter & Sons sold some used equipment for $112,000. The accumulated depreciation on the equipment when sold was $128,000. Peter & Sons properly recorded a $44,000 gain on the sale.
The original cost of the equipment when it was purchased several years ago by Peter & Sons must have been:

Accepted Answer

$112,000 cash + $128,000 accumulated depreciation - $44,000 gain on sale
= $196,000 original cost of equipment

Question 4

During 2019, Belmont, Inc. had net sales of $19,880,000 and net income of $2,430,000. Total assets were $13,800,000 at January 1, 2019 and $16,200,000 at December 31, 2019.
Belmont's asset turnover for 2019 is:

Accepted Answer

Asset turnover = Net sales / Average total assets.
X = $19,880,000 / [($13,800,000 + $16,200,000) / 2]
X = $19,880,000 / $15,000,000
X = 1.325

Question 5

Grove Company's 2019 asset turnover was 3.0. The firm's total assets were $8,750,000 at January 1, 2019 and $9,300,000 at December 31, 2019.
Net sales for 2019 were:

Accepted Answer

Asset turnover = Net sales / Average total assets.
3.0 = X / [($8,750,000 + $9,300,000) / 2]
X = 3.0 x [($8,750,000 + $9,300,000) / 2]
X = 3.0 x $9,025,000
X = $27,075,000

Question 6

Tiffany Company's 2019 asset turnover was 3.0. The firm's total assets were $10,000,000 at January 1, 2019 and $12,400,000 at December 31, 2019. Net sales for 2019 were:

Accepted Answer

Asset turnover = Net sales / Average total assets.
3.0 = X / [($10,000,000 + $12,400,000) / 2]
X = 3.0 x [($10,000,000 + $12,400,000) / 2]
X = 3.0 x $11,200,000
X = $33,600,000

Question 7

Nutgum Company made a package purchase of three pieces of machinery for $48,000. The fair market values of the machinery were determined to be as follows:
 What cost should Nutgum record for Machine C?

Accepted Answer

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Question 8

Taffy Company made a package purchase of three pieces of machinery for $144,000. The fair market values of the machinery were determined to be as follows:
 What cost should Taffy Company record for Machine C?

Accepted Answer

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Question 9

Hubert Company purchased a property (including land and building). The company acquired the property in exchange for a 15-year mortgage for $1,800,000. Their insurance company appraised the components as follows:
 What should be the cost basis for the building?

Accepted Answer

Sometimes several long-lived assets are purchased as a package. The total package price is allocated among the acquired assets on the basis of their relative market or appraisal values.
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Question 10

Henry Company purchased a property (including land and building). The company acquired the property in exchange for a 15-year mortgage for $5,400,000. Their insurance company appraised the components as follows:
 What should be the cost basis for the building?

Accepted Answer

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Question 11

Caesar Company bought a machine on January 1, 2019. The machine cost $144,000 and had an expected salvage value of $24,000. The life of the machine was estimated to be 5 years.
Using straight line depreciation, the book value of the machine at the beginning of the third year would be:

Accepted Answer

Annual depreciation = _($₁₄₄_{,000 - $}₂₄_,_{000) / 5 = $}₂₄_,₀₀₀ _{$144,000 - (2 x $24,000) = $96,000}

Question 12

Apple Company bought a machine on January 1, 2019. The machine cost $432,000 and had an expected salvage value of $72,000. The life of the machine was estimated to be 5 years.
Using straight line depreciation, the book value of the machine at the beginning of the third year would be:

Accepted Answer

Annual depreciation = _($₄₃₂_{,000 - $}₇₂_{,000) / 5 = $}₇₂_,000 _$₄₃₂_{,000 - (2 x $}₇₂_{,000) = $}₂₈₈_,000

Question 13

Jafari Corporation purchased a truck at the beginning of 2019 for $180,000. The truck is estimated to have a salvage value of $6,000 and a useful life of 240,000 miles. It was driven 36,000 miles in 2019 and 64,000 miles in 2020.
What is the book value of the truck on December 31, 2020?

Accepted Answer

Depreciation per unit = ($180,000 - $6,000) / 240,000 = $0.725 per mile
$0.725 x (36,000 + 64,000) = $72,500
$180,000 - $72,500 = $107,500

Question 14

Arabia Corporation purchased a truck at the beginning of 2019 for $540,000. The truck is estimated to have a salvage value of $18,000 and a useful life of 480,000 miles. It was driven 72,000 miles in 2019 and 128,000 miles in 2020.
What is the book value of the truck on December 31, 2020?

Accepted Answer

Depreciation per unit = ($540,000 - $18,000) / 480,000 = $1.0875 per mile
$1.0875 x (72,000 + 128,000) = $217,500
$540,000 - $217,500 = $322,500

Question 15

On April 30, 2019, Macy Products purchased machinery for $132,000. The useful life of this machinery is estimated at 5 years, with a $32,000 residual value. The company uses the double-declining-balance method.
Depreciation expense for the fiscal year ending on December 31, 2020 will be:

Accepted Answer

$132,000 x 2/5 x 8/12 = $35,200
($132,000 - $35,200) x 2/5 = $38,720

Question 16

On April 30, 2019, Penny Products purchased machinery for 396,000. The useful life of this machinery is estimated at 5 years, with a $96,000 residual value. The company uses the double-declining-balance method.
Depreciation expense for the fiscal year ending on December 31, 2020 will be:

Accepted Answer

$396,000 x 2/5 x 8/12 = $105,600
($396,000 - $105,600) x 2/5 = $116,160

Question 17

On April 1, 2019, Lake Co. purchased machinery for $240,000. Salvage value was estimated to be $10,000. The machinery will be depreciated over ten years using the double-declining balance method.
If depreciation is computed on the basis of the nearest full month, determine the depreciation expense for the period January 1 thru December 31, 2020 on this machinery.

Accepted Answer

$240,000 x 2/10 x 9/12 = $36,000
($240,000 - $36,000) x 2/10 = $40,800

Question 18

Paden City Company purchased a new van for floral deliveries on January 1, 2019. The van cost $108,000 with an estimated life of 5 years and $12,000 salvage value at the end of its useful life. The double-declining-balance method of depreciation will be used.
What is the balance of the Accumulated Depreciation account at the end of 2020?

Accepted Answer

$108,000 x 2/5 = $43,200
($108,000 - $43,200) x 2/5 = $25,920
$43,200 + $25,920 = $69,120

Question 19

Durham Company purchased a new van for floral deliveries on January 1, 2019. The van cost $84,000 with an estimated life of 5 years and $10,000 salvage value at the end of its useful life. The double-declining-balance method of depreciation will be used.
What is the balance of the Accumulated Depreciation account at the end of 2020?

Accepted Answer

$84,000 x 2/5 = $33,600
($84,000 - $33,600) x 2/5 = $20,160
$33,600 + 20,160 = $53,760

Question 20

On January 1, 2018, Beast Company acquired equipment for $360,000. The estimated life of the equipment is 5 years or 20,000 hours. The estimated residual value is $60,000.
What is the amount of depreciation expense for 2020, if the company uses the double-declining-balance method of depreciation?

Accepted Answer

$360,000 x 2/5 = $144,000
($360,000 - $144,000) x 2/5 = $86,400
($216,000 - $86,400) x 2/5 = $51,840

Quiz 9: Accounting for Long-Lived and Intangible Assets

On June 30, 2019, Milch, Inc. sold some used equipment for $120,000. The equipment had been purchased several years ago for $260,000. Milch, Inc. properly recorded a $28,000 gain on the sale. The accumulated depreciation on the equipment at the date of sale was:

During 2019, Belmont, Inc. had net sales of $19,880,000 and net income of $2,430,000. Total assets were $13,800,000 at January 1, 2019 and $16,200,000 at December 31, 2019. Belmont's asset turnover for 2019 is:

Grove Company's 2019 asset turnover was 3.0. The firm's total assets were $8,750,000 at January 1, 2019 and $9,300,000 at December 31, 2019. Net sales for 2019 were:

Tiffany Company's 2019 asset turnover was 3.0. The firm's total assets were $10,000,000 at January 1, 2019 and $12,400,000 at December 31, 2019. Net sales for 2019 were:

Nutgum Company made a package purchase of three pieces of machinery for $48,000. The fair market values of the machinery were determined to be as follows: What cost should Nutgum record for Machine C?

Taffy Company made a package purchase of three pieces of machinery for $144,000. The fair market values of the machinery were determined to be as follows: What cost should Taffy Company record for Machine C?

Hubert Company purchased a property (including land and building) . The company acquired the property in exchange for a 15-year mortgage for $1,800,000. Their insurance company appraised the components as follows: What should be the cost basis for the building?

Henry Company purchased a property (including land and building) . The company acquired the property in exchange for a 15-year mortgage for $5,400,000. Their insurance company appraised the components as follows: What should be the cost basis for the building?

Caesar Company bought a machine on January 1, 2019. The machine cost $144,000 and had an expected salvage value of $24,000. The life of the machine was estimated to be 5 years. Using straight line depreciation, the book value of the machine at the beginning of the third year would be:

Apple Company bought a machine on January 1, 2019. The machine cost $432,000 and had an expected salvage value of $72,000. The life of the machine was estimated to be 5 years. Using straight line depreciation, the book value of the machine at the beginning of the third year would be:

Jafari Corporation purchased a truck at the beginning of 2019 for $180,000. The truck is estimated to have a salvage value of $6,000 and a useful life of 240,000 miles. It was driven 36,000 miles in 2019 and 64,000 miles in 2020. What is the book value of the truck on December 31, 2020?

Arabia Corporation purchased a truck at the beginning of 2019 for $540,000. The truck is estimated to have a salvage value of $18,000 and a useful life of 480,000 miles. It was driven 72,000 miles in 2019 and 128,000 miles in 2020. What is the book value of the truck on December 31, 2020?

On April 30, 2019, Macy Products purchased machinery for $132,000. The useful life of this machinery is estimated at 5 years, with a $32,000 residual value. The company uses the double-declining-balance method. Depreciation expense for the fiscal year ending on December 31, 2020 will be:

On April 30, 2019, Penny Products purchased machinery for 396,000. The useful life of this machinery is estimated at 5 years, with a $96,000 residual value. The company uses the double-declining-balance method. Depreciation expense for the fiscal year ending on December 31, 2020 will be:

On January 1, 2018, Beast Company acquired equipment for $360,000. The estimated life of the equipment is 5 years or 20,000 hours. The estimated residual value is $60,000. What is the amount of depreciation expense for 2020, if the company uses the double-declining-balance method of depreciation?