Question : 147.Fortune Drilling Company acquires a mineral deposit at a cost : 1258933

 

 

147.Fortune Drilling Company acquires a mineral deposit at a cost of $5,900,000. It incurs additional costs of $600,000 to access the deposit, which is estimated to contain 2,000,000 tons and is expected to take 5 years to extract. What journal entry would be needed to record the expense for the first year assuming 418,000 tons were mined?    

A.Debit Depletion Expense $1,233,100; credit Accumulated Depletion $1,233,100.

 

B.Debit Amortization Expense $1,358,500; credit Accumulated Amortization $1,358,500.

 

C.Debit Depreciation Expense $1,358,500; credit Accumulated Depreciation $1,358,500.

 

D.Debit Depletion Expense $1,358,500; credit Accumulated Depletion $1,358,500.

 

E.Debit Depreciation Expense $1,233,100; credit Accumulated Depreciation $1,233,100.

Depletion Expense = [(Cost – Salvage Value)/Estimated Useful Life (in tons)] * Tons Mined Depletion Expense = [($5,900,000 + $600,000 – $0)/2,000,000] * 418,000 = $1,358,500

 

 

 

148.Bering Rock acquires a granite quarry at a cost of $590,000, which is estimated to contain 200,000 tons of granite and is expected to take 6 years to remove. Compute the depletion expense for the first year assuming 38,000 tons were removed.    

A.$98,333.

 

B.$93,158.

 

C.$38,000.

 

D.$12,881.

 

E.$112,100.

Depletion Expense = (Cost – Salvage Value)/Estimated Useful Life in tons * Tons removed Depletion Expense = [($590,000 – $0)/200,000] * 38,000 = $112,100

 

 

 

149.Bering Rock acquires a granite quarry at a cost of $590,000, which is estimated to contain 200,000 tons of granite and is expected to take 6 years to remove. What journal entry would be needed to record the expense for the first year assuming 38,000 tons were removed?   

A.Debit Depletion Expense $112,100; credit Accumulated Depletion $112,100.

 

B.Debit Amortization Expense $112,100; credit Natural Resources $112,100.

 

C.Debit Depreciation Expense $93,158; credit Accumulated Depreciation $93,158.

 

D.Debit Depletion Expense $93,158; credit Accumulated Depletion $93,158.

 

E.Debit Depreciation Expense $98,333; credit Accumulated Depreciation $98,333.

Depletion Expense = (Cost – Salvage Value)/Estimated Useful Life in tons * Tons removedDepletion Expense = [($590,000 – $0)/200,000] * 38,000 = $112,100

 

 

 

150.Phoenix Agency leases office space for $7,000 per month. On January 3, Phoenix incurs $65,000 to improve the leased office space. These improvements are expected to yield benefits for 8 years. Phoenix has 5 years remaining on its lease. Compute the amount of expense that should be recorded the first year related to the improvements.   

A.$20,000.

 

B.$6,000.

 

C.$13,000.

 

D.$65,000.

 

E.$8,125.

Amortization Expense = Cost/Lesser of Estimated Useful Life or Remaining Lease LengthAmortization Expense = $65,000/5 = $13,000

 

 

 

151.Crestfield leases office space for $7,000 per month. On January 3, the company incurs $12,000 to improve the leased office space. These improvements are expected to yield benefits for 10 years. Crestfield has 4 years remaining on its lease. What journal entry would be needed to record the expense for the first year related to the improvements?   

A.Debit Amortization Expense $1,200; credit Accumulated Amortization $1,200.

 

B.Debit Depletion Expense $3,000; credit Accumulated Depletion $3,000.

 

C.Debit Depreciation Expense $1,200; credit Accumulated Depreciation $1,200.

 

D.Debit Depletion Expense $12,000; credit Accumulated Depletion $12,000.

 

E.Debit Amortization Expense $3,000; credit Accumulated Amortization $3,000.

Amortization Expense = Cost/Lesser of Estimated Useful Life or Remaining Length of LeaseAmortization Expense = $12,000/4 = $3,000

 

 

 

152.Ngu owns equipment that cost $93,500 with accumulated depreciation of $64,000. Ngu asks $35,000 for the equipment but sells the equipment for $33,000. Compute the amount of gain or loss on the sale.   

A.$3,500 loss.

 

B.$5,500 gain.

 

C.$5,500 loss.

 

D.$3,000 gain.

 

E.$3,500 gain.

Gain/Loss on Sale = Cash Received – Book ValueGain/Loss on Sale = $33,000 – ($93,500 – $64,000); Gain of $3,500

 

 

 

153.Gaston owns equipment that cost $90,500 with accumulated depreciation of $61,000. Gaston asks $30,000 for the equipment but sells the equipment for $26,000. Which of the following would not be part of the journal entry to record the disposal of the equipment?    

A.Debit Accumulated Depreciation $61,000.

 

B.Credit Equipment $90,500.

 

C.Debit Loss on Disposal of Equipment $3,500.

 

D.Credit Gain on Disposal of Equipment $3,500.

 

E.Debit Cash $6,000.

Gain/Loss on Sale = Cash Received – Book Value Gain/Loss on Sale = $26,000 – ($90,500 – $61,000); Loss of $3,500 

Cash$26,000

Accumulated Depreciation61,000

Loss on Sale3,500

Equipment$90,500

 

 

 

 

154.Flask Company reports net sales of $4,315 million; cost of goods sold of $2,808 million; net income of $283 million; and average total assets of $2,136. Compute its total asset turnover.   

A.1.31.

 

B.2.02.

 

C..13.

 

D..76.

 

E..50.

Total Asset Turnover = Net Sales/Average Total AssetsTotal Asset Turnover = $4,315/$2,136 = 2.02

 

 

 

155.Riverboat Adventures pays $310,000 plus $15,000 in closing costs to buy out a competitor. The real estate consists of land appraised at $35,000, a building appraised at $105,000, and paddleboats appraised at $210,000. Compute the cost that should be allocated to the building.    

A.$97,500.

 

B.$105,000.

 

C.$89,178.

 

D.$140,000.

 

E.$93,000.

Percent Allocated to Building = $105,000/($105,000 + $35,000 + $210,000) = 0.30 Cost Allocated to Building = ($310,000 + $15,000) * 0.30 = $97,500

 

 

 

156.Riverboat Adventures pays $310,000 plus $15,000 in closing costs to buy out a competitor. The real estate consists of land appraised at $35,000, a building appraised at $105,000, and paddleboats appraised at $210,000. Compute the cost that should be allocated to the land.    

A.$93,000.

 

B.$140,000.

 

C.$32,500.

 

D.$31,000.

 

E.$97,500.

Percent Allocated to Land = $35,000/($105,000 + $35,000 + $210,000) = 0.10Cost Allocated to Land = ($310,000 + $15,000) * 0.10 = $32,500

 

 

 

157.Victory Company purchases office equipment at the beginning of the year at a cost of $15,000. The machine’s useful life is estimated to be 7 years with a $1,000 salvage value. The journal entry to record the first year depreciation is:    

A.Debit Depreciation Expense $2,143; credit Accumulated Depreciation $2,143.

 

B.Debit Depreciation Expense $2,000; credit Office Equipment $2,000.

 

C.Debit Office Equipment $2,000; credit Accumulated Depreciation $2,000.

 

D.Debit Accumulated Depreciation $2,143; credit Office Equipment $2,143.

 

E.Debit Depreciation Expense $2,000; credit Accumulated Depreciation $2,000.

Depreciation Expense = (Cost – Salvage Value)/Estimated Useful LifeDepreciation Expense = ($15,000 – $1,000)/7 = $2,000

 

 

 

158.Victory Company purchases office equipment at the beginning of the year at a cost of $15,000. The machine’s useful life is estimated to be 7 years with a $1,000 salvage value. The book value at the end of 7 years is:    

A.$2,143.

 

B.$1,000.

 

C.$2,000.

 

D.$14,000.

 

E.$0.

Depreciation Expense = (Cost – Salvage Value)/Estimated Useful LifeDepreciation Expense = ($15,000 – $1,000)/7 = $2,000$15,000 – ($2,000 * 7) = $1,000