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Exam 7: Long-Term Assets

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Question 61

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Fruitasia purchased land,a building,and equipment for $800,000.The estimated fair values of the land,building,and equipment are $100,000,$700,000,and $200,000,respectively.At what amount would the company record the land?

A) $80,000.
B) $90,000.
C) $100,000.

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Question 62

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A patent is an exclusive right to a published work such as a song,film,or painting.A patent is an exclusive right to manufacture a product or to use a process.A copyright is an exclusive right of protection given to the creator of a published work such as a song,film,painting,photograph,book,or computer software.

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Question 63

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Kansas Enterprises purchased equipment for $60,000 on January 1,2018.The equipment is expected to have a five-year life,with a residual value of $5,000 at the end of five years.Using the straight-line method,depreciation expense for 2019 and the book value at December 31,2019 would be:

Kansas Enterprises purchased equipment for $60,000 on January 1,2018.The equipment is expected to have a five-year life,with a residual value of $5,000 at the end of five years.Using the double-declining balance method,the book value at December 31,2019 would be:

On January 1,2016,Jacob Inc.purchased a commercial truck for $48,000 and uses the straight-line depreciation method.The truck has a useful life of eight years and an estimated residual value of $8,000.On December 31,2017,Jacob Inc.sold the truck for $43,000.What amount of gain or loss should Jacob Inc.record on December 31,2017?

The service life of an asset is always equal to the full life of the asset.The service life is how long the company expects to receive benefits from the asset before disposing of it.

Depreciation in accounting records the decrease in value of an asset.Depreciation in accounting is the process of allocating to expense the cost of an asset over its service life.

Accounting for impairment losses:

A building was purchased for $50,000.The asset has an expected useful life of 6 years and depreciation expense each year is $8,000 using the straight-line method.What is the residual value of the building?

The balance sheet of Paradise Pizza reports total assets of $1,500,000 and $1,700,000 at the beginning and end of the year,respectively.Net income and sales for the year are $240,000 and $2,000,000,respectively.What is Paradise Pizza's asset turnover?

Most companies use straight-line amortization for intangibles and credit the amount of amortization to the intangible asset account itself rather than to Accumulated Amortization.

Cash received from the sale of salvaged materials increases the total cost of land.Cash received from the sale of salvaged materials decreases the total cost of land.

Maple Inc.has the following information regarding its assets: What amount of loss should be recorded due to asset impairments? $\begin{array} { | l | r | r | r | } \hline & \text { Book Value } & \begin{array} { r } \text { Estimated Cash } \\\text { Flows }\end{array} & \text { Fair Value } \\\hline \text { Equipment } & \$ 35,000 & \$ 30,000 & \$ 28,000 \\\hline \text { Building } & \$ 68,000 & \$ 70,000 & \$ 65,000 \\\hline \text { Patent } & \$ 30,000 & \$ 34,000 & \$ 32,000 \\\hline\end{array}$

Residual value,also referred to as salvage value,is the amount the company expects to receive from selling the asset at the end of its service life.

The acquiring company records goodwill equal to the purchase price less the book value of the net assets acquired.The acquiring company records goodwill equal to the purchase price less the fair value of the net assets acquired.

Goodwill is amortized over its estimated useful life.Intangible assets with an indefinite useful life (goodwill and most trademarks)are not amortized.

The exclusive right to benefit from a creative work,such as a film,is a:

Alliance Products purchased equipment that cost $120,000.It had an estimated useful life of four years and no residual value.The equipment was depreciated by the straight-line method and was sold at the end of the second year of use for $65,000 cash.Alliance should record:

Which of the following intangible assets has an indefinite useful life?

On January 1,2018,Jacob Inc.purchased a commercial truck for $48,000 and uses the straight-line depreciation method.The truck has a useful life of eight years and an estimated residual value of $8,000.Assume the truck was totaled in an accident on December 31,2019.What amount of gain or loss should Jacob Inc.record on December 31,2019?