Question : 121. Roadwarrior Express Inc. owns a moving van that originally cost : 1230674

 

 

121. Roadwarrior Express Inc. owns a moving van that originally cost $500,000 and currently has $450,000 of accumulated depreciation. The fair value of the moving van is $120,000. Roadwarrior  Express Inc. exchanges the van plus $480,000 in cash for a new moving van costing $600,000.  The entry to record the transaction is as follows:   
A. Equipment (new van)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  600,000 
Accumulated Depreciation (old van)   . . . . . . . . . .. . . . . . . . . .450,000 
   Equipment (old van) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  500,000 
   Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     480,000 
   Gain on Trade-in of Old Van . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  70,000 
B. Equipment (new van)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  600,000 
Accumulated Depreciation (old van)   . . . . . . . . . .. . . . . . . . . .450,000 
   Equipment (old van) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  570,000 
   Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     480,000 
C. Equipment (new van)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  600,000 
Accumulated Depreciation (old van)   . . . . . . . . . .. . . . . . . . . .380,000 
   Equipment (old van) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  500,000 
   Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     480,000 
D. Equipment (old van) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  480,000 
Gain on Trade-in of Old Van . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,000 
   Equipment (new van)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   600,000 
   Accumulated Depreciation (old van)   . . . . . . . . .  . . . . . . . . . . . . . . . . 450,000 

E. Equipment (old van) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  570,000
Cash . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  480,000
   Equipment (new van)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . .  . . .  600,000 
   Accumulated Depreciation (old van)   . . . . . . . . . .. . . . . . . . . . .  . . . . . 450,000 

 

122. How are tangible long-lived assets’ acquisition cost and accumulated depreciation disclosed? 
A. Tangible long-lived assets typically appear under the title Property, Plant, and Equipment.
B. Information is displayed on the balance sheet.
C. Tangible long-lived assets typically appear under noncurrent assets.
D. Acquisition cost and accumulated depreciation are omitted from the balance sheet but are detailed in the notes.
E. all of the above

 

123. Depreciation and amortization expenses appear in the income statement, and are sometimes   
A. disclosed separately.
B. included in selling and administrative expenses.
C. included as part of cost of goods sold expense.
D. all of the above
E. none of the above

 

124. The financial statements and notes provide information for analyzing changes in property, plant, and equipment. What ratios are used by analysts? 
A. Fixed Asset Turnover
B. Proportion of Depreciable Assets
C. Average Age of Depreciable Assets
D. all of the above
E. none of the above

 

125. Why is analysis of intangible assets more challenging than the analysis of tangible long-lived assets? 
A. Except for software development costs under U.S. GAAP and development costs under IFRS, firms generally do not recognize internally developed intangibles as assets on the balance sheet.
B. U.S. GAAP and IFRS require firms to measure the fair values of identifiable intangibles acquired in a business combination and assess whether they have finite lives or indefinite lives.
C. Differences between U.S. GAAP and IFRS in the treatment of development costs mean that comparisons of firms that apply U.S. GAAP with firms that apply IFRS require consideration of and adjustment for those differences.
D. all of the above
E. none of the above

 

126. Blue Company decided to construct its own manufacturing building. Blue Company should capitalize which of the following interest costs? 
A. Building interest costs incurred prior to construction while occupying another building.
B. Building interest costs incurred during construction.
C. Building interest costs incurred after construction
D. All interest costs incurred.
E. No interest costs incurred

 

127. 3-E Company depreciates an asset with a cost of $55,000 over 10 years using the straight-line method of depreciation and the yearly depreciation expense is $4,000, what is the estimated salvage value of the asset? 
A. $5,000
B. $10,000
C. $15,000
D. $20,000
E. $20,375

 

128. Which method of depreciation will result in the greatest depreciation charge in the last year of the asset’s life? 
A. 125% declining balance
B. straight-line
C. 150% declining balance
D. sum-of-the-years’ digits
E. double declining balance

 

129. (CMA adapted, Jun 90 #27) When a fixed plant asset with a five-year estimated useful life is sold during the second year, how would the use of a double declining balance method of depreciation instead of the straight-line method affect the gain or loss on the sale of the fixed plant asset?
                       Gain                Loss 
A. Increase         Increase
B. Increase         Decrease
C. Decrease        Increase
D. Decrease       Decrease
E. cannot be determined by the information provided.

 

130. In Year 1, a firm purchased a truck for $12,000. The estimated salvage value was $2,000 and the estimated useful life was 10 years. In Year 4, it was determined that the salvage value would only be $1,000 and that the truck would have a total estimated useful life of 7 years rather than 10. Assuming the straight-line method is used, what is the depreciation expense for Year 4 of the truck? 
A. $1,000
B. $1,750
C. $1,950
D. $2,000
E. $2,250

 

 

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