92.
During 2016, a company purchased a mine at a cost of $3,000,000. The company spent an
additional $600,000 getting the mine ready for its intended use. It is estimated that 300,000
tons of mineral can be removed from the mine and the residual value of the mine will be
$600,000. During 2016, 45,000 tons of mineral were removed from the mine and 35,000 tons
were sold.
Which of the following statements is correct with respect to the accounting for the mine?
93.
During 2016, a company purchased a mine at a cost of $3,000,000. The company spent an
additional $600,000 getting the mine ready for its intended use. It is estimated that 300,000
tons of mineral can be removed from the mine and the residual value of the mine will be
$600,000. During 2016, 45,000 tons of mineral were removed from the mine and 35,000 tons
were sold.
Which of the following statements is incorrect with respect to the accounting for the mine?
94.
Which of the following is most likely to be an intangible asset with an indefinite life?
95.
Which one of the following would not be recorded as an intangible asset?
Topic Area: Intangible assets-Capitalize or expense
96.
Which of the following is not true regarding certain assets?
97.
Failure to record amortization expense on a patent during the current year will result in which
of the following?
98.
Which of the following properly describes the accounting for goodwill?
99.
Which of the following properly describes the accounting for a patent?
100.
Which of the following statements is incorrect?
101.
During 2016, the Bowtie Company reported net income of $1,872 million, depreciation
expense of $1,412 million and $978 million paid for purchases of property, plant and
equipment. What would be the effect on cash flows from operating activities during 2016?
102.
Lincoln Restaurants reported net income in 2016 of $45.9 million and depreciation expense of
$48.8 million. It also reported additions to property and equipment of $162.9 million. Which of
the following disclosures would appear on the 2016 statement of cash flows?
103.
Barkley Company has a piece of equipment that it has been depreciating for 3 years. The
equipment originally was estimated to have a useful life of 8 years and at the beginning of the
current year, Barkley determines that the equipment’s life has been extended to 10 years.
When Barkley calculates depreciation for the current year, how many years of life should be
used to calculate the depreciation expense?
104.
Williams Company purchased a machine costing $25,000 and is depreciating it over a 10-year
estimated useful life with a residual value of $3,000. At the beginning of the eighth year, a
major overhaul on it was completed at a cost of $8,000, and the total estimated useful life was
changed to 12 years with the residual value unchanged. How much is the year 8 depreciation
expense assuming use of the straight-line depreciation method?
105.
Augie Corporation purchased a truck at a cost of $60,000. It has an estimated useful life of
five years and estimated residual value of $5,000. At the beginning of year three, Augie’s
managers concluded that the total useful life would be four years, rather than five years.
There was no change in the estimated residual value. What is the amount of depreciation that
Augie should record for year 3 under the straight-line depreciation method?
106.
International Financial Reporting Standards (IFRS) require the recording of research and
development costs as follows:
107.
International Financial Reporting Standards (IFRS) allow accounting for tangible and
intangible assets at fair value by:
108.
Which of the following is not true in comparing U.S. GAAP and International Financial
Reporting Standards (IFRS)?
Essay Questions
109.
The following information is available for Coca-Cola and PepsiCo:
Coca-
Cola
PepsiCo
Net fixed assets (beginning of
year)
$4,168
$5,266
Net fixed assets (end of year)
4,435
5,438
Net sales for the year
19,889
20,438
Net income for the year
2,177
2,183
Required:
Compute the fixed asset turnover ratio for both Coca Cola and PepsiCo. Round your answers
to two decimal places.
110.
The following information was available for Landmark Restaurants for the past three years.
Required:
Using this information, compute the fixed asset turnover ratio for Year 3 and Year 2. (Round
your answers to two decimal places.)
In thousands
Year 3
Year 2
Year 1
Net fixed assets
$965,575
$830,930
$587,829
Net sales
1,105,755
894,795
746,642
Net income
45,901
41,522
26,920
111.
On January 1, 2016, Trenton Company purchased a machine costing $50,000. Trenton also
incurred the following costs: transportation, $1,000; installation, $2,000; and sales tax, $3,000.
Required:
Prepare the journal entry to record the machine acquisition assuming cash was paid.
112.
Waterloo Corporation purchased factory equipment for a cost of $1,800,000. There was also
the cost of $100,000 for delivery, $220,000 for installation and modifications to the factory
building, and $60,000 in interest costs on borrowed funds used to acquire the equipment.
Required:
Calculate the acquisition cost of the new equipment.
113.
In Year 4, Landmark Restaurants reported the cost of property and equipment at $1,189.8
million and the accumulated depreciation at $224.2 million. In that same year, Coca Cola
reported $10,149 million in long-lived, productive assets and accumulated depreciation on
them of $4,058.
Required:
A. Estimate the approximate percent of remaining life of the assets for Landmark and Coca
Cola.
B. Which company appears to have newer assets with longer remaining lives?
114.
Hi-Crest Company purchased a machine on January 1, 2016, for $300,000. The machine has
an estimated useful life of 5 years and a $10,000 residual value.
Required:
Calculate depreciation expense and the year-end book value for 2016 and 2017 using the
double declining-balance method of depreciation.
115.
The financial statements of Franklin Company contained the following errors:
Item
December
31, 2015
December
31, 2016
Depreciation
expense on office
equipment
$1,000
understated
$900
overstated
Required:
A. Was net income for 2015 understated or overstated? Briefly explain your answer.
B. 1. Considering the effect of the errors of both years at December 31, 2016, is retained
earnings overstated or understated, and by what amount?
2. Briefly explain your answer to part B (1).