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.
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
a.Trademark
b.Oil field
c.Gold mine
d.Building
e.Franchise
f.Timberland
g.Patent
h.Land
i.Copyright
j.Leasehold
Plant assets
Resources
k.Trademark
l.Oil field
m.Gold mine
n.Building
o.Franchise
p.Timberland
q.Patent
r.Land
s.Copyright
t.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 lease space in a
building for 7 years. 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 2 of the
current year, and are estimated to have a useful life equal to 13 years. Prepare entries for
Timberlake to record (a) its payment for the office improvements, (b) 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 Year 2 and
$22,640 for Year 1; end-of-year total assets of $14,875 for Year 2 and $13,680 for Year 1.
Compute its total asset turnover for Year 2 and assess its level if competitors average a total asset
turnover of 2.0 times.
253) ________ is an estimate of an asset’s value at the end of its 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 good operating condition; they are necessary if an
asset is to perform to expectations over its useful life are called ________.
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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.