Question 1

Salta Company installs a manufacturing machine in its factory at the beginning of the year at a cost of $87,000.The machine's useful life is estimated to be 5 years,or 400,000 units of product,with a $7,000 salvage value.During its second year,the machine produces 84,500 units of product.What journal entry would be needed to record the machines' second year depreciation under the units-of-production method?

Accepted Answer

Depreciation Expense = [(Cost - Salvage Value)/ Estimated Useful Life (in units)] *
Production of Units
Depreciation Expense = [($87,000 - $7,000)/400,000] * 84,500 = $16,900

Question 2

Salta Company installs a manufacturing machine in its factory at the beginning of the year at a cost of $87,000.The machine's useful life is estimated to be 5 years,or 400,000 units of product,with a $7,000 salvage value.During its second year,the machine produces 84,500 units of product.Determine the machines' second year depreciation under the units-of-production method.

Accepted Answer

Depreciation Expense = [(Cost - Salvage Value)/ Estimated Useful Life (in units)] *
Production of Units
Depreciation Expense = [($87,000 - $7,000)/400,000] * 84,500 = $16,900

Question 3

Big River Rafting pays $310,000 plus $15,000 in closing costs to buy out a competitor.The real estate consists of land appraised at $105,000,a building appraised at $210,000,and equipment appraised at $35,000.Compute the cost that should be allocated to the building.

Accepted Answer

Cost Allocated to Building = $210,000/$350,000 = .60 * $325,000 = $195,000

Question 4

Salta Company installs a manufacturing machine in its factory at the beginning of the year at a cost of $87,000.The machine's useful life is estimated to be 5 years,or 400,000 units of product,with a $7,000 salvage value.During its second year,the machine produces 84,500 units of product.Determine the machines' second year depreciation under the straight-line method.

Accepted Answer

Depreciation Expense = (Cost - Salvage Value)/Estimated Useful Life
Depreciation Expense = ($87,000 - $7,000)/5 = $16,000

Question 5

Carmel Company acquires a mineral deposit at a cost of $5,900,000.It incurs additional costs of $600,000 to access the deposit,which is estimated to contain 2,000,000 tons and is expected to take 5 years to extract.What journal entry would be needed to record the expense for the first year assuming 418,000 tons were mined?

Accepted Answer

Depletion Expense = [(Cost - Salvage Value)/Estimated Useful Life (in tons)] *
Tons Mined
Depletion Expense = [($5,900,000 + $600,000 - $0)2,000,000] * 418,000 = $1,358,500

Question 6

All of the following statements regarding increases in the value of plant assets under U.S.GAAP and IFRS are true except:

Accepted Answer

Under U.S. GAAP, impairment losses cannot be reversed, so a company cannot reverse an impairment and include it in comprehensive income.

Question 7

Cambria owns equipment that cost $93,500 with accumulated depreciation of $64,000.Cambria asks $35,000 for the equipment but sells the equipment for $33,000.The journal entry to record the disposal of the asset would involve all of the following except:

Accepted Answer

Gain/Loss on Sale = Cash Received - Book Value
Gain/Loss on Sale = $33,000 - ($93,500 - $64,000); Gain of $3,500
Debit Cash for $33,000 received; Credit Equipment for $93,500 to remove the asset; Debit Accumulated Depreciation for $64,000 to remove the contra-asset; Credit Gain on Sale for $3,500

Question 8

What is depreciation of plant assets?
 What are the factors to consider in computing depreciation?

Accepted Answer

The answer of What is depreciation of plant assets?
 What...

Question 9

Define plant assets and identify the four primary issues in accounting for them.

Accepted Answer

The answer of Define plant assets and identify the four...

Question 10

Marble Company purchased a machine costing $120,000,terms 1/10,n/30.The machine was shipped FOB shipping point and freight charges were $2,000.The machine requires special mounting and wiring connections costing $10,000.When installing the machine,$1,300 in damages occurred.Materials costing $1,500 are used in testing and adjusting the machine to produce a satisfactory product.Compute the cost recorded for this machine assuming Marble paid within the discount period.

Accepted Answer

Cost of Machine = ($120,000 * .99) + $2,000 + $10,000 + $1,500 = $132,300

Question 11

Cambria owns equipment that cost $93,500 with accumulated depreciation of $64,000.Cambria asks $35,000 for the equipment but sells the equipment for $33,000.Compute the amount of gain or loss on the sale.

Accepted Answer

Gain/Loss on Sale = Cash Received - Book Value
Gain/Loss on Sale = $33,000 - ($93,500 - $64,000); Gain of $3,500

Question 12

A company purchased a machine valued at $66,000.It traded in an old machine for a $9,000 trade-in allowance and the company paid $57,000 cash with the trade-in.The old machine cost $44,000 and had accumulated depreciation of $36,000.This transaction has commercial substance.What is the recorded value of the new machine?

Accepted Answer

11ea7277_eeb2_a0f4_9608_1d2d9ec8b87b_TB2411_00

Question 13

Monte Ray leases office space for $7,000 per month.On January 3,Monte Ray incurs $75,000 to improve his leased office space.These improvements are expected to yield benefits for 8 years.Ray has 6 years remaining on his lease.What journal entry would be needed to record the expense for the first year related to the improvements.

Accepted Answer

Amortization Expense = Cost/Lesser of Estimated Useful Life or Remaining Length of
Lease
Amortization Expense = $75,000/6 = $12,500

Question 14

A company bought a new display case for $42,000 and was given a trade-in of $2,000 on an old display case,so the company paid $40,000 cash with the trade-in.The old case had an original cost of $37,000 and accumulated depreciation of $34,000.If the transaction has commercial substance,the company should record the new display case at:

Accepted Answer

11ea7277_eeb2_52d3_9608_f305ff6bdb21_TB2411_00 Since the transaction has commercial substance, the loss on exchange is recognized and the new display case should be recorded at its $42,000 price.

Question 15

Carmel Company acquires a mineral deposit at a cost of $5,900,000.It incurs additional costs of $600,000 to access the deposit,which is estimated to contain 2,000,000 tons and is expected to take 5 years to extract.Compute the depletion expense for the first year assuming 418,000 tons were mined.
A.$1,233,100.
B.$1,358,500.
C.$1,300,000.
D.$1,180,000.
E.$1,280,000.

Accepted Answer

Tons Mined
Depletion Expense = [($5,900,000 + $600,000 - $0)2,000,000] * 418,000 = $1,358,500

Question 16

Salta Company installs a manufacturing machine in its factory at the beginning of the year at a cost of $87,000.The machine's useful life is estimated to be 5 years,or 400,000 units of product,with a $7,000 salvage value.During its second year,the machine produces 84,500 units of product.Determine the machines' second year depreciation under the double-declining-balance method.

Accepted Answer

Depreciation Expense = Book Value * Double Straight-line Rate
Depreciation Expense = $87,000 * (2 * 20%) = $34,800 (Depreciation Expense, year 1)
Depreciation Expense = Book Value * Double Straight-line Rate
Depreciation Expense = ($87,000 - $34,800) * (2 * 20%) = $20,880 (Deprec. Exp, year 2)

Question 17

Monte Ray leases office space for $7,000 per month.On January 3,Monte Ray incurs $75,000 to improve his leased office space.These improvements are expected to yield benefits for 8 years.Ray has 6 years remaining on his lease.Compute the amount of expense that should be recorded the first year related to the improvements.

Accepted Answer

Amortization Expense = Cost/Lesser of Estimated Useful Life or Remaining Length of
Lease
Amortization Expense = $75,000/6 = $12,500

Question 18

Cambria Company reports net sales of $4,315 million; cost of goods sold of $2,808 million; net income of $283 million; and average total assets of $2,136.Compute its total asset turnover.

Accepted Answer

Total Asset Turnover = Net Sales/Average Total Assets
Total Asset Turnover = $4,315/$2,136 = 2.02

Question 19

Explain the impact,if any,on depreciation when estimates that determine depreciation change.

Accepted Answer

The answer of Explain the impact,if any,on depreciation when estimates...

Question 20

Explain how to calculate total asset turnover.Describe what it reveals about a company's financial condition,whether a higher or lower ratio is desirable,and how it is best applied for comparative purposes.

Accepted Answer

The answer of Explain how to calculate total asset turnover.Describe...

Quiz 10: Plant Assets, natural Resources, and Intangibles