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Exam 7: Fixed Assets and Intangible Assets

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Question 31

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A company acquired some land for $80,000 to construct a new office complex. Legal fees paid were $2,300, delinquent taxes assumed were $3,400, and $5,850 was paid to remove an old building. Materials salvaged from the demolition of the building were sold for $1,950. Determine the cost of the land to be reported on the balance sheet.

A) $93,500
B) $91,550
C) $85,700
D) $89,600

E) A) and D)
F) B) and D)

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Question 32

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Depreciable cost is computed as:

A) cost less accumulated depreciation.
B) book value less residual value.
C) cost less residual value.
D) market value less residual value.

E) B) and D)
F) C) and D)

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Question 33

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Goodwill refers to the excess of purchase price of a business over the fair value of its net assets.

Which of the following is a characteristic of fixed assets?

The difference between a fixed asset's initial cost and its current market value is called the asset's depreciable cost.

The cost of a patent should be amortized :

The estimated amount that an asset can be sold for at the end of its useful life is called its book value.

A company made some expensive repairs to equipment and buildings during the past year. (a) What criteria is used in determining whether the repairs are capital expenditures or revenue expenditures, and (b) what is the effect on the company's financial statements if they are incorrectly recorded as capital expenditures?

Which type of depreciation occurs when an asset can no longer provide services for which it was intended?

Which of the following should be included in the acquisition cost of a piece of equipment?

A machine with a useful life of 6 years and a residual value of $3,000 was purchased at the beginning of year 1 for $30,000. The machine was sold for $15,000 on April 1 in year 4. (a)What was the book value of the machine at the end of yea 3 assuming the straight-line method of depreciation is used? (b) Illustrate the effects on the accounts and financial statements of the depreciation from Jamuary 1 to April 1 of year 4. (c)Illustrate the effects on the accounts and financial statements of the sale of the machine on April 1.

The depreciation calculated using Modified Accelerated Cost Recovery System is primarily used for:

Machine with a useful life of 5 years and a residual value of $6,000 was purchased on January 3, 2007, for $48,500. The machine was sold on January 5, 2012, for $13,000. (a)What is the book value of the machine on January 5,2012 , assuming straight-line depreciation is used? (b)Tliustrate the effects on the accounts and the finmcial statements of the sale of the machine on J wnury $5,2012$ . (c)Illustrate the effects on the accounts and the finencial statements of the sale of the machine if it had been sold for $\$ 18,000$ instead

If a capital expenditure is treated as a revenue expenditure, then:

Companies usually compute depletion by using the double-declining-balance method.

Determine the cost of the land, based on the following data. $\begin{array}{ll}\$ 180,000 & \text { Land purchase price } \\15,000 & \text { Broke1's commission } \\5,000 & \text { Payment for the demolition and removal of existing building } \\1,000 & \text { Cashreceived from the sale of materials salvaged from the demolished building }\end{array}$

The process of transferring the cost of metal ores and other minerals removed from the earth to an expense account is called:

Which of the following is an example of a capital expenditure?

Book value is computed as:

The straight-line method of depreciation is appropriate if usage of the asset varies considerably from year to year.