Chapter 9: Reporting and Integrating Long-Lived Tangible and Intangible Assets
October 29, 2008
1. Which of the following would be included in the acquisition cost of an asset and capitalized?
a. Purchase price
b. Installation costs
c. Transportation charges
d. All of the above
2. Which of the following should be capitalized?
a. Routine maintenance of the manufacturing equipment.
b. Research and development costs.
c. Cost of a wastebasket, stapler, and hand calculator.
d. Addition to an existing building.
3. Which of the following is NOT depreciated?
a. Office Building
b. Delivery Truck
c. Land
d. Manufacturing equipment
4. Intangible assets…
a. have no physical characteristics.
b. include plant, property, and equipment.
c. are depreciated or amortized.
d. None of the above.
5. What is materiality?
6. For each of the following, determine the type of assets related to each. (i.e. What type of assets are amortized, etc).
Depreciation:
Amortization:
Depletion:
7. When is the ONLY time you can capitalize goodwill?
8. Company ABC acquired a delivery truck for $55,000. The salvage (residual) value is $5,000. The estimated useful life is 5 years. The estimated useful life in miles is 200,000 miles.
a. Using straight-line depreciation, how much is depreciation expense per year?
b. After 3 years, how much is the carrying (book) value of the delivery truck, using straight-line depreciation?
c. Using the units of production depreciation method, how much depreciation expense is recorded for every mile?
d. Assume Company ABC drives 50,000 miles the first year. How much depreciation expense would be recorded for Year 1 (using units of production)? What is the carrying (book) value at the end of Year 1?
e. Assume Company ABC drives 30,000 miles in the second year. How much depreciation expense would be recorded in Year 2 (using units of production)? What is the carrying (book) value after Year 2?
f. If you were using double declining balance depreciation, what would the straight-line depreciation rate be?
g. Using double declining balance, what would the depreciation expense be for the first year? What would the carrying (book) value be after Year 1?
9. On July 1, 2008 Company XYZ determines that estimated future cash flows from a piece of equipment is $20,000. The current carrying (book) value of the asset is $36,000. When should this loss be recognized and for how much?
10. Company B acquired a building for $250,000. On Dec. 31, 2009, the accumulated depreciation is $55,000. What is the carrying (book) value of the building on Dec. 31, 2009?