Chapter 09 – Long-Term Assets: Fixed and Intangible
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Company
A
Company
B
Company
C
Company
D
Sales
$5,000,000
$720,000
$900,000
$1,040,000
Beginning fixed assets
$450,000
$275,000
$290,000
$380,000
Ending fixed assets
$800,000
$325,000
$310,000
$420,000
Fixed asset turnover
8 times
2.4 times
3 times
2.6 times
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.09–07 – LO: 09–07
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.13 – Long-term Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:24 PM
DATE MODIFIED:
10/16/2017 5:33 PM
214. Financial statement data for the years ended December 31 for Parker Corporation are as follows:
Current Year
Prior Year
Sales
$2,595,600
$2,409,498
Fixed assets (net):
Beginning of the year
$901,070
$820,000
End of the year
829,330
901,070
(a) Determine the fixed asset turnover for the current and prior years.
(b) Does the change in fixed asset turnover from the prior year to the current year indicate a favorable or
unfavorable trend?
ANSWER:
Current
Year
Prior
Year
Fixed assets:
Beginning of the year
$901,070
$820,000
End of the year
829,330
901,070
Average fixed assets
$865,200
$860,535
(a) Sales divided by average fixed assets:
Current year ($2,595,600/$865,200) 3.0
Prior year ($2,409,498/$860,535) 2.8
(b) The increase in fixed assets turnover indicates an increase in efficiency of using
fixed assets to generate sales.
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Easy
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.09–07 – LO: 09–07
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.13 – Long-term Assets Reporting
Chapter 09 – Long-Term Assets: Fixed and Intangible
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(a)
Price of new, $120,000; trade-in allowance on old, $4,000; balance paid in cash.
(b)
Price of new, $120,000; trade-in allowance on old, $34,000; balance paid in cash.
ANSWER:
(a)
Accumulated Depreciation—Machinery
55,000
Machinery
120,000
Loss on Disposal of Fixed Assets
21,000
Machinery
80,000
Cash
116,000
(b)
Accumulated Depreciation—Machinery
55,000
Machinery
120,000
Machinery
80,000
Gain on Exchange of Machinery
9,000
Cash
86,000
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Challenging
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.09–03 – LO: 09–03
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.13 – Long-term Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:24 PM
DATE MODIFIED:
10/16/2017 5:33 PM
222. Equipment acquired at a cost of $126,000 has a book value of $42,000. Journalize the disposal of the equipment
under the following independent assumptions.
(a)
The equipment had no market value and was discarded.
(b)
The equipment is sold for $54,000.
(c)
The equipment is sold for $24,000.
(d)
The equipment is traded-in for a similar asset. The list price of the new equipment is
$63,000. The buyer gave no cash in the exchange. The transaction lacks commercial
substance.
Journal
Date
Description
Post.
Ref.
Debit
Credit
Chapter 09 – Long-Term Assets: Fixed and Intangible
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Page 87
ANSWER:
Journal
Date
Description
Post.
Ref.
Debit
Credit
(a)
Loss on Disposal of Equipment
42,000
Accumulated Depreciation—Equipment
84,000
Equipment
126,000
(b)
Cash
54,000
Accumulated Depreciation—Equipment
84,000
Equipment
126,000
Gain on Sale of Equipment
12,000
(c)
Cash
24,000
Accumulated Depreciation—Equipment
84,000
Loss on Sale of Equipment
18,000
Equipment
126,000
(d)
Equipment (new equipment)
42,000
Accumulated Depreciation—Equipment
84,000
Equipment (old)
126,000
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Moderate
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.09–03 – LO: 09–03
FNMN.WAJO.19.09-APP – LO: 09-APP
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.13 – Long-term Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:24 PM
DATE MODIFIED:
10/16/2017 5:33 PM
223. Assume the following facts related to a land purchase:
Land purchase price
$178,000
Broker’s commission
15,000
Payment for demolition and removal of
existing building
5,000
Cash received from the sale of
materials salvaged from the demolished
2,000
Chapter 09 – Long-Term Assets: Fixed and Intangible
Copyright Cengage Learning. Powered by Cognero.
Page 88
building
a.
$178,000
b.
$180,000
c.
$193,000
d.
$196,000
ANSWER:
d
RATIONALE:
Cost of land = Land purchase price + Broker‘s commission + Payment for the
demolition and removal of existing building – Cash received from the sale of materials
salvaged from demolished building = $178,000 + $15,000 + $5,000 – $2,000 =
$196,000
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.09–01 – LO: 09–01
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.13 – Long-term Assets Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG – Analytic
DATE CREATED:
10/4/2017 12:14 PM
DATE MODIFIED:
10/16/2017 5:33 PM
224. Falcon Company acquired an adjacent lot to construct a new warehouse, paying $40,000 and giving a short-term note
for $410,000. Legal fees paid were $13,275, delinquent taxes assessed were $14,500, and fees paid to remove an old
building from the land were $15,800. Materials salvaged from the demolition of the building were sold for $6,800. A
contractor was paid $890,000 to construct the new warehouse. What is the cost of the land to be reported on the balance
sheet?
a.
$486,775
b.
$493,575
c.
$450,000
d.
$443,200
ANSWER:
a
RATIONALE:
Initial cost
of land:
($40,000 +
$410,000)
$450,000
Plus:
Legal fees
$13,275
Delinquent taxes
14,500
Demolition of
building
15,800
43,575
Less:
Salvage of
materials
6,800
Cost of
land
$486,775
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
