156.
Minor Company installs a machine in its factory at the beginning of the year at a cost of
$135,000. The machine’s useful life is estimated to be 5 years, or 300,000 units of product,
with a $15,000 salvage value. During its first year, the machine produces 64,500 units of
product. What journal entry would be needed to record the machines’ first year
depreciation under the units-of-production method?
157.
Fortune Drilling Company acquires a mineral deposit at a cost of $5,900,000 and expected
salvage value of zero. 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.
158.
Fortune Drilling Company acquires a mineral deposit at a cost of $5,900,000 and expected
salvage value of zero. 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?
159.
Bering Rock acquires a granite quarry at a cost of $590,000, which is estimated to contain
200,000 tons of granite and is expected to take 6 years to remove. Compute the depletion
expense for the first year assuming 38,000 tons were removed.
160.
Bering Rock acquires a granite quarry at a cost of $590,000, which is estimated to contain
200,000 tons of granite and is expected to take 6 years to remove. What journal entry
would be needed to record the expense for the first year assuming 38,000 tons were
removed?
161.
Phoenix Agency leases office space for $7,000 per month. On January 3, Phoenix incurs
$65,000 to improve the leased office space. These improvements are expected to yield
benefits for 8 years. Phoenix has 5 years remaining on its lease. Compute the amount of
expense that should be recorded the first year related to the improvements.
162.
Crestfield leases office space for $7,000 per month. On January 3, the company incurs
$12,000 to improve the leased office space. These improvements are expected to yield
benefits for 10 years. Crestfield has 4 years remaining on its lease. What journal entry
would be needed to record the expense for the first year related to the improvements?
163.
Ngu owns equipment that cost $93,500 with accumulated depreciation of $64,000. Ngu
asks $35,000 for the equipment but sells the equipment for $33,000. Compute the amount
of gain or loss on the sale.
164.
Gaston owns equipment that cost $90,500 with accumulated depreciation of $61,000.
Gaston asks $30,000 for the equipment but sells the equipment for $26,000. Which of the
following would not be part of the journal entry to record the disposal of the equipment?
165.
Flask 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.
166.
Riverboat Adventures pays $310,000 plus $15,000 in closing costs to buy out a competitor.
The real estate consists of land appraised at $35,000, a building appraised at $105,000,
and paddleboats appraised at $210,000. Compute the cost that should be allocated to the
building.
167.
Riverboat Adventures pays $310,000 plus $15,000 in closing costs to buy out a competitor.
The real estate consists of land appraised at $35,000, a building appraised at $105,000,
and paddleboats appraised at $210,000. Compute the cost that should be allocated to the
land.
168.
Victory Company purchases office equipment at the beginning of the year at a cost of
$15,000. The machine’s useful life is estimated to be 7 years with a $1,000 salvage value.
The journal entry to record the first year depreciation is:
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169.
Victory Company purchases office equipment at the beginning of the year at a cost of
$15,000. The machine’s useful life is estimated to be 7 years with a $1,000 salvage value.
The book value at the end of 7 years is:
Matching Questions
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170.
Match each of the following terms with the appropriate definitions
1. Accelerated
The process of allocating the cost of a
natural resource to the period when it are
2. Intangible
An expenditure that makes a plant
3. Total asset
Expenditures to keep a plant asset in
4. Units-of–
A depreciation method that charges a
varying amount to expense for each
period of an asset’s useful life depending
Certain nonphysical assets used in
operations that confer long-term rights,
privileges, or competitive advantages on
A method of depreciation that yields
larger expense during the early years of
an asset’s life and smaller expense in the
The process of systematically
allocating the cost of an intangible asset
8. Revenue
The amount by which the company’s
value exceeds the value of its individual
A measure of a company’s
effectiveness in using its assets to
A cost reported as an expense on the
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171.
Match each of the following terms with the appropriate definitions.
1. Leasehold
Major repairs that extend the useful life
of a plant asset beyond its original
A condition where a plant asset is no
longer useful in producing goods or
Alternations or improvements to leased
The process of allocating the cost of
natural resources to the periods when they
An estimate of an asset’s value at the
The total cost of a plant asset less its
7. Extraordinary
Assets that increase the benefits of
land, have a limited useful life, and are
A right granted that gives its owner the
exclusive privilege to publish and sell
musical, literary, or artistic work during the
9. Land
The insufficient capacity of plant assets
to meet the company’s productive
An exclusive right granted to its owner
to manufacture and sell an item, or to use
Short Answer Questions
172.
Define plant assets and identify the four primary issues in accounting for them.
173.
What is depreciation of plant assets? What are the factors necessary in computing
depreciation?
174.
What are some of the variables that make a plant asset’s useful life difficult to predict?
175.
Explain the purpose of and method of depreciation for partial years.
176.
Explain the impact, if any, on depreciation when estimates that determine depreciation
change.