236)
A company purchased mining property for $1,560,000. The property was estimated to contain
13,000,000 tons of ore. In the current year, the company removed and sold 263,000 tons of ore.
Calculate the depletion expense for the current year.
237)
A company purchased mining property for $4,875,000 containing an estimated 15,000,000 tons of
ore. In Year 1, it mined 689,000 tons of ore and in Year 2, it mined 935,000 tons. Calculate the
depletion expense for Year 1 and Year 2 and determine the book value of the property at the end of
Year 2.
238)
A company purchased mining property for $1,837,500 containing an estimated 7,350,000 tons of
ore. In Year 1, it mined and sold 857,000 tons of ore. Calculate the depletion expense for Year 1
and prepare the journal entry to record the depletion.
239)
Record the following events and transactions for Leonard Company for the current year.
1. On January 2, Leonard purchased a patent for $35,000 with a remaining useful life of 10 years.
Prepare the journal entry to amortize the patent at the end of the first year.
2. On January 3, Leonard made an advance payment on a leasehold of $840,000. The leasehold
expires in 15 years. Prepare the journal entry to amortize the leasehold at the end of the first year.
3. On January 4, Leonard purchased a music distributor’s collection of lyrics and songs for
$1,425,000. The copyrights have a remaining life of another 30 years. Prepare the journal entry to
amortize the copyright at the end of the first year.
240)
A company traded an old forklift for a new forklift, receiving a $13,500 trade-in allowance and
paying the remaining $47,200 in cash. The old forklift had cost $43,000, a 5-year useful life and a
$5,000 salvage value. Straight-line accumulated depreciation of $27,200 had been recorded as of the
exchange date.
1. What was the book value of the old forklift on the date of the exchange?
2. What amount of gain or loss (indicate which) should be recognized in recording the exchange,
assuming the transaction has commercial substance?
3. What amount should be recorded as the cost of the new forklift?
241)
A machine had an original cost of $60,000. After $45,000 of depreciation was recorded, the
machine was traded in on a new machine priced at $75,000. A $10,500 trade-in allowance was
received on the old machine and the balance of $64,500 was paid in cash. This transaction has
commercial substance. Prepare the general journal entry to record this trade-in.
242)
A company exchanged its used machine for a new machine in a transaction that had commercial
substance. The old machine cost $68,000, and the new one had a cash price of $95,000. The
company had taken $59,000 depreciation on the old machine and was allowed a $2,500 trade-in
allowance and the balance of $92,500 was paid in cash. What gain or loss should be recorded on
the exchange?
243)
A company exchanged an old automobile for a newer model. The old automobile account had a
cost of $36,000 and accumulated depreciation of $25,000 as of the exchange date. The new
automobile had a cash price of $34,000, but the company was given a $15,000 trade-in allowance
and the balance of $19,000 was paid in cash. Prepare the journal entry to record the exchange, if
the transaction has commercial substance.
244)
During the current year, a company exchanged an old truck costing $58,000 with accumulated
depreciation of $52,000 for a new truck. The new truck had a cash price of $80,000 and the
company received a $16,000 trade-in allowance on the old truck with the balance of $64,000 paid
in cash. Prepare the journal entry to record the exchange, assuming the transaction has commercial
substance.
245)
During the current year, Beldon Co. acquired a new computer with a cash price of $12,800 by
exchanging an old one on which the company received a $1,500 trade-in allowance (with the
balance of $11,300 paid in cash). The old computer cost $9,000 and its accumulated depreciation
was $5,500 as of the exchange date. Assuming the exchange transaction had commercial
substance, prepare the journal entry to record the exchange.
246)
A company purchased store equipment for $4,300 by trading in old equipment with a cost of
$2,000 and that had accumulated depreciation of $1,900 as of the exchange date. The company
received a $75 trade-in allowance for the old equipment with the balance of $4,225 paid in cash.
Prepare the journal entry to record the exchange, assuming the transaction had commercial
substance.
162
247)
On April 1 of the current year, a company traded an old machine that originally cost $32,000 and that
had accumulated depreciation of $24,000 for a similar new machine that had a cash price of $40,000.
1. Prepare the entry to record the exchange under the assumption that a $5,000 trade-in allowance
was received and the balance of $35,000 was paid in cash. Assume the exchange transaction had
commercial substance.
2. Prepare the entry to record the exchange under the assumption that instead of a $5,000 trade-in
allowance, a $12,500 trade-in allowance was received and the balance of $27,500 was paid in cash.
Assume the exchange transaction has commercial substance.
248)
Identify the balance sheet classification of each of the following assets by placing an X in the correct
classification: Plant Assets, Natural Resources, or Intangibles.
Plant
assets
Natural
Resources
Intangible
Assets
a.Trademark
b.Oil field
c.Gold mine
d.Building
e.Franchise
f.Timberland
g.Patent
h.Land
i.Copyright
j.Leasehold
249)
A machine costing $450,000 with a 4-year life and an estimated salvage value of $30,000 is
installed by Peters Company on January 1. The company estimates the machine will produce
1,050,000 units of product during its life. It actually produces the following units for the first 2
years: Year 1, 260,000; Year 2, 275,000. Enter the depreciation amounts for years 1 and 2 in the
table below for each depreciation method. Show calculation of amounts below the table.
Double-
Units-of– Declining-
Year Straight-Line Production Balance
Year 1
Year 2
250)
On July 1 of the current year, Glover Mining Co. pays $5,400,000 for land estimated to contain
7,200,000 tons of recoverable ore. It installs machinery on July 3 costing $864,000 that has an 8
year life and no salvage value and is capable of mining the ore deposit in six years. The company
removes and sells 745,000 tons of ore during its first six months of operations ending on December
31. Depreciation of the machinery is in proportion to the mine’s depletion as the machinery will be
abandoned after the ore is mined. Prepare the entries Glover must record for (a) the purchase of the
ore deposit, (b) the costs and installation of the machinery, (c) the depletion assuming the land has
a zero salvage value, and (d) the depreciation on the machinery.
251)
On July 1 of the current year, Timberlake Company signed a contract to sublease space in a
building for 7 years. Timberlake Company paid $56,000 for the right to sublease this space. After
taking possession of the leased space, Timberlake pays $140,000 for improving the office portion
of the lease space. The improvements are paid on July 6 of the current year, and are estimated to
have a useful life equal to the 14 years remaining in the life of the building. Prepare entries for
Timberlake to record (a) its payment for the right to sublease the building space, (b) its payment for
the office improvements, (c) the December 31 year-end entry to amortize the cost of the sublease,
(d) the December 31 year-end entry to amortize the office improvements.
252)
Westport Company reports the following in millions: net sales of $25,300 for 2016 and $22,640 for
2015; end-of-year total assets of $14,875 for 2016 and $13,680 for 2015. Compute its total asset
turnover for 2016 and assess its level if competitors average a total asset turnover of 2.0 times.
SHORT ANSWER QUESTIONS
253)
is an estimate of an asset’s value at the end of its benefit period (or useful life).
254)
The insufficient capacity of a company’s plant asset to meet the company’s productive demands is
called ________.
255)
________ refers to a plant asset that is no longer useful in producing goods or services with a
competitive advantage because of new inventions and improvements.
256)
A results from revising estimates of the useful life or salvage value of a plant asset.
257)
The federal income tax rules for depreciating assets are known as ________.
258)
The depreciation method that recognizes equal amounts of annual depreciation over the life of an
asset is ________.
259)
The depreciation method that charges a varying amount to expense for each period of an asset’s
useful life depending on its usage is ________.
260)
The depreciation method that uses a depreciation rate that is a multiple of the straight-line rate and
applies it to an asset’s beginning-of-period book value is ________.
261)
Capital expenditures that extend an asset’s useful life beyond its original estimate are called
________.
262)
Additional costs of plant assets that do not materially increase the asset’s life or productive
capabilities are recorded as ________.
263)
Additional costs of plant assets that provide benefits extending beyond the current period; they
increase or improve the type or amount of service an asset provides are treated as ________.
264)
Revenue expenditures to keep an asset in normal, good operating condition; they are necessary if
an asset is to perform to expectations over its useful life are called ________.
265)
are capital expenditures that make a plant asset more productive but do not always
increase an asset’s life; they often involve adding a component to an asset or replacing one of its
old components with a better one.