Assignment
1. Land improvements are depreciable assets.
True
False
2. Which of the following is not a depreciable asset?
Buildings
Land improvements
Land
Equipment
3. Expenditures to maintain the operating efficiency and expected productive life of the unit are expensed as incurred.
True
False
4. What is depreciation?
An adjustment to market value over time
A valuation approach
A cost allocation method
A cash accumulation approach
5. Cuso Company purchased equipment on January 1, 2016, at a total invoice cost of $400,000. The equipment has an estimated salvage value of $10,000 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at December 31, 2017, if the straight-line method of depreciation is used?
$78,000
$80,000
$160,000
$156,000
6. When there is a change in estimated depreciation
new plant assets should be acquired to replace the old.
previous depreciation should be corrected.
current and future years' depreciation should be revised.
only future years' depreciation should be revised.
7. On June 1, 2017, Brislin Company sold some equipment for $22,000. The original cost was $80,000, the estimated salvage value was $8,000, and the expected useful life was 8 years. The equipment was fully depreciated. How much is the gain or loss on the sale?
$5,400 gain
$50,000 loss
$850 loss
$14,000 gain
8. Given the following account balances at year end, how much is amortization expense on Anisha Enterprises income statement for the current year if Anisha thinks all of its intangibles should be amortized over ten years?
|
Sales revenue
|
$45,000,000
|
|
Patents
|
1,500,000
|
|
Accounts receivable
|
4,000,000
|
|
Land
|
15,000,000
|
|
Equipment
|
25,000,000
|
|
Copyrights
|
1,000,000
|
|
Goodwill
|
4,500,000
|
|
Research & development
|
2,000,000
|
Some other answer
$900,000
$250,000
$700,000
9. Walk Co's average total assets are $200,000, net sales total to $100,000, and net income is $40,000. How much net income did Walk Co generate for each dollar of assets invested?
$0.20
$2.00
$5.00
$0.50
10. Schneider Trucking Inc. purchased a new semi-truck on January 1, 2016 for $200,000. Its useful life is expected to be 4 years and its salvage value is estimated at $25,000. What is the depreciation for 2017 using the declining-balance method at double the straight-line rate?
$50,000
$87,500
$43,750
$100,000
11. Carla Vista Co. purchased a new machine on October 1, 2017, at a cost of $79,240. The company estimated that the machine has a salvage value of $7,980. The machine is expected to be used for 71,500 working hours during its 7-year life.
Compute the depreciation expense under the straight-line method for 2017 and 2018, assuming a December 31 year-end. (Round answers to 0 decimal places, e.g. 5,275.)
12. Sunland Company was organized on January 1. During the first year of operations, the following plant asset expenditures and receipts were recorded in random order.
|
Debit
|
|
1.
|
Excavation costs for new building
|
$13,455
|
|
2.
|
Architect's fees on building plans
|
37,320
|
|
3.
|
Full payment to building contractor
|
660,800
|
|
4.
|
Cost of real estate purchased as a plant site (land $283,300 and building $32,700)
|
316,000
|
|
5.
|
Cost of parking lots and driveways
|
38,300
|
|
6.
|
Accrued real estate taxes paid at time of purchase of real estate
|
3,110
|
|
7.
|
Installation cost of fences around property
|
8,470
|
|
8.
|
Cost of demolishing building to make land suitable for construction of new building
|
31,000
|
|
9.
|
Real estate taxes paid for the current year on land
|
7,500
|
|
|
$1,115,955
|
|
Credit
|
|
10.
|
Proceeds from salvage of demolished building
|
$ 12,400
|
Analyze the transactions using the following table column headings. Enter the amounts in the appropriate columns. For amounts in the Other Accounts column, also indicate the account title. (If an amount fall into the Land and Buildings column then enter "Not Applicable" in the account title column. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
13. At December 31, 2017, Ayayai Corporation reported the following plant assets.
|
Land
|
|
$ 5,238,000
|
|
Buildings
|
$26,730,000
|
|
|
Less: Accumulated depreciation-buildings
|
20,821,050
|
5,908,950
|
|
Equipment
|
69,840,000
|
|
|
Less: Accumulated depreciation-equipment
|
8,730,000
|
61,110,000
|
|
Total plant assets
|
|
$72,256,950
|
During 2018, the following selected cash transactions occurred.
Apr. 1 Purchased land for $3,841,200.
May 1 Sold equipment that cost $1,047,600 when purchased on January 1, 2011. The equipment was sold for $296,820.
June 1 Sold land for $2,793,600. The land cost $1,746,000.
July 1 Purchased equipment for $1,920,600.
Dec. 31 Retired equipment that cost $1,222,200 when purchased on December 31, 2008. No salvage value was received.
Journalize the transactions. Ayayai uses straight-line depreciation for buildings and equipment. The buildings are estimated to have a 40-year useful life and no salvage value; the equipment is estimated to have a 10-year useful life and no salvage value. Update depreciation on assets disposed of at the time of sale or retirement. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Record adjusting entries for depreciation for 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Prepare the plant assets section of Ayayai's balance sheet at December 31, 2018. (Hint: You may wish to set up T accounts, post beginning balances, and then post 2018 transactions.) (List Plant Assets in order of Land, Building and Equipment.)
14. Martinez Corporation and Riverbed Corporation, two companies of roughly the same size, are both involved in the manufacture of shoe-tracing devices. Each company depreciates its plant assets using the straight-line approach. An investigation of their financial statements reveals the information shown below.
|
Martinez Corp.
|
Riverbed Corp.
|
|
Net income
|
$ 247,000
|
$ 338,000
|
|
Sales revenue
|
1,875,000
|
1,955,500
|
|
Total assets (average)
|
4,290,000
|
4,036,000
|
|
Plant assets (average)
|
273,000
|
1,892,000
|
|
Intangible assets (goodwill)
|
457,100
|
0
|
(a) For each company, calculate these values: (Round answers to 2 decimal places, e.g. 6.25% or 17.54.)
|
|
Martinez Corp.
|
Riverbed Corp.
|
|
(1)
|
Return on assets
|
|
%
|
|
%
|
|
(2)
|
Profit margin
|
|
%
|
|
%
|
|
(3)
|
Asset turnover
|
|
times
|
|
times
|
In recent years, Sunland Company has purchased three machines. Because of frequent employee turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods have been used. Information concerning the machines is summarized in the table below.
|
Machine
|
Acquired
|
Cost
|
Salvage
Value
|
Useful Life
(in years)
|
Depreciation
Method
|
|
1
|
Jan. 1, 2015
|
$125,000
|
$37,000
|
8
|
Straight-line
|
|
2
|
July 1, 2016
|
77,000
|
10,600
|
5
|
Declining-balance
|
|
3
|
Nov. 1, 2016
|
77,100
|
8,100
|
6
|
Units-of-activity
|
For the declining-balance method, Sunland Company uses the double-declining rate. For the units-of-activity method, total machine hours are expected to be 34,500. Actual hours of use in the first 3 years were: 2016, 840; 2017, 3,800; and 2018, 5,500.
Compute the amount of accumulated depreciation on each machine at December 31, 2018.
If machine 2 was purchased on April 1 instead of July 1, what would be the depreciation expense for this machine in 2016? In 2017?
2016 2017