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Exam 7: Long-Term Assets

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Question 41

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Soccer Wholesale purchased land and a warehouse for $800,000.In addition to the purchase price,Soccer Wholesale makes the following expenditures related to the acquisition: broker's commission,$48,000; title insurance,$3,000; and miscellaneous closing costs,$8,000.The warehouse is immediately demolished at a cost of $80,000 in anticipation of building a new warehouse.Determine the amount Soccer Wholesale should record as the cost of the land.

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Question 42

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We allocate natural resources to expense through a process known as "depletion."

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B) False

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Question 43

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Nanki Corporation purchased equipment at the beginning of 2012 for $650,000.In 2012 and 2013,Nanki depreciated the asset on a straight-line basis with an estimated useful life of 8 years and a $10,000 residual value.In 2014,due to changes in technology,Nanki revised the useful life to a total of six years (four more years) with zero residual value.What depreciation expense would Nanki record for the year 2014 on this equipment?

A copyright is an exclusive right of protection given to the creator of a published work such as a song,film,painting,photograph,book,or computer software.

Holiday Laboratories purchased a high speed industrial centrifuge at a cost of $420,000.Shipping costs totaled $15,000.Foundation work to house the centrifuge cost $8,000.An additional water line had to be run to the equipment at a cost of $3,000.Labor and testing costs totaled $6,000.Materials used up in testing cost $3,000.What is the total cost of the equipment? How much of this amount should be expensed immediately?

Goodwill is:

Residual value,also referred to as salvage value,is the amount the company expects to receive from selling the asset at the end of its service life.

On January 1,2012,The Donut Stop purchased a patent for $80,000.The remaining legal life is 20 years,but the company estimates the patent will be useful for only five more years.In January 2013,the company incurred legal fees of $25,000 in successfully defending a patent infringement suit.The successful defense did not change the company's estimate of useful life.The Donut Stop's year end is December 31^st.Record the purchase and amortization in 2012 and the legal fees and amortization in 2013.What is the balance in the Patents account at the end of 2013?

China Dragon purchased new restaurant equipment on September 1,2012,for $8,000.Residual value at the end of an estimated 5 year service life is expected to be $2,000.Calculate depreciation expense using the straight-line method for 2012 and 2013,assuming a December 31 year-end.

The balance sheet of Hidden Valley Farms reports total assets of $450,000 and $550,000 at the beginning and end of the year,respectively.Net income and sales for the year are $100,000 and $800,000,respectively.What is Hidden Valley's profit margin?

Strawberry Fields purchased a tractor at a cost of $38,000 and sold it two years later for $25,000.Strawberry Fields recorded depreciation using the straight-line method,a five-year service life,and an $8,000 residual value.What was the gain or loss on the sale? Record the sale.

Which of the following is considered a "contra" account?

The Accumulated Depreciation account allows us to reduce the carrying value of assets through depreciation,while maintaining the original cost of each asset in the accounting records.

Berry Co.purchases a patent on January 1,2012,for $40,000 and the patent has an expected useful life of five years with no residual value.Assuming Berry Co.uses the straight-line method,what is the carrying value of the patent on December 31,2013?

The following financial information is from Cook Company: What is the amount of long-term assets assuming the accounts above reflect normal activity?

The franchisee's initial fee is recorded as an expense on the income statement. The franchisee's initial fee is recorded as an intangible asset and then expensed over the life of the franchise agreement.

The Bomb Pop Corporation sold ice cream equipment for $16,000.They originally purchased the equipment for $40,000,and depreciation through the date of sale totaled $25,000.What was the gain or loss on the sale of the equipment? Record the sale of the equipment.

Goodwill is amortized over its estimated useful life. Intangible assets with an indefinite useful life (goodwill and most trademarks)are not amortized.

Which of the following subsequent expenditures would be capitalized?

We record purchased intangible assets at their original cost plus all other costs necessary to get the asset ready for use.