8.1 For each of the following items, indicate whether the expenditure should be capitalized (“C”) or expensed (“E”) in the period when it was incurred: _______ A betterment _______ Replacement of a minor broken part on a machine _______ An expenditure that increases an existing asset's useful life _______ An expenditure that increases the efficiency and effectiveness of a productive asset but does not increase its residual value _______ An expenditure that increases the efficiency and effectiveness of a productive asset and its residual value _______ An expenditure that increases a productive asset's output quality _______ An overhaul to a machine that increases its fair market value and its production capacity by 30% without extending the machine's useful life _______ Ordinary repairs _______ A major overhaul _______ An expenditure that results in a 10%-per-year production cost saving _______ Costs of a major overhaul that brings the asset's condition back to “new,” with no change in the estimated useful life

8.1 For each of the following items, indicate whether the expenditure should be capitalized (“C”) or expensed (“E”) in the period when it was incurred: ___ A betterment _ Replacement of a minor broken part on a machine _ An expenditure that increases an existing asset's useful life _ An expenditure that increases the efficiency and effectiveness of a productive asset but does not increase its residual value _ An expenditure that increases the efficiency and effectiveness of a productive asset and its residual value _ An expenditure that increases a productive asset's output quality _ An overhaul to a machine that increases its fair market value and its production capacity by 30% without extending the machine's useful life _ Ordinary repairs _ A major overhaul _ An expenditure that results in a 10%-per-year production cost saving _____ Costs of a major overhaul that brings the asset's condition back to “new,” with no change in the estimated useful life

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter5: Adjusting Entries And The Work Sheet

Section: Chapter Questions

Problem 1MC: LO1 The purpose of depreciation is to (a) spread the cost of an asset over its useful life. (b) show...

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11. An expenditure that increases an asset's capacity or efficiency or extends its useful life is a(n): A) capital expenditure. B)expense. C)addition. D)improvement. 12. A capital expenditure is: A)debited to an expense account. B)credited to an expense account. C)debited to an asset account. D)debited to a shareholders' equity account 15.The journal entry to record a major expenditure to upgrade equipment that extends its useful life beyond the original estimate would include a: A)credit to Depreciation Expense. B)debit to Equipment. C)debit to Depreciation Expense. D)debit to Repair Expense.
QUESTION 17 Match the term on the left to the appropriate description on the right. v Historical cost A. The amount of a PP&E asset's acquisition cost that will be depreciated over the asset's useful life v Depreciable cost B. An asset whose value derives from rights and privileges rather than physical existence v Salvage value v Accumulated depreciation C. The capitalized acquisition cost of an asset v Intangible asset v Amortization D. The process of allocating an intangible asset's acquisition cost to expense over its useful life E. The book value of a fully-depreciated PP&E asset F. The total amount of depreciation expense that has been recorded to-date for a PP&E asset
The cost incurred to extend an asset's useful life is recorded as: O a. routine expenditures. Ob. capital expenditures. Oc. accrued expenditures. Od. maintenance expenditures.
The costs for environmental clean-up at the end of an asset’s useful life (under ASPE) Select one: a. include only costs related to the acquisition of the asset. b. are recognized only if they represent a legal obligation. c. are capitalized once they have become apparent. d. are always expensed as incurred.
The book value of an asset is defined as ____________________. a. Estimated fair market value b. Cost –Accumulated depreciation c. Cost – salvage – accumulated depreciation d. Cost- Salvage value
An expenditure that maintains an existing asset so that it can function in the manner intended should be Select one: a. partially expensed in the period in which it is made. b. fully capitalized in the period in which it is made. c. partially capitalized in the period in which it is made. d. fully expensed in the period in which it is made.
#13 Various PPE acquisition methods: via stock issuance, deferred payment purchase; subsequent expenditures 1. Zonker Company acquired property, plant, and equipment from Doonesbury Company. The assets had these appraised values: $ 400,000 1,200,000 Land Buildings Equipment 800,000 Total $ 2,400,000 Zonker gave 12,500 shares of its $100 par value common stock in exchange. The stock had a market price of $168 per share on the date of the acquisition. 2. Zonker Company incurred these expenditures with respect one of its buildings: Major repairs to building Construction of bases for equipment to be operated in the building Driveways and parking lots Remodeling of office space in building, new partitions and walls Special land assessment by the city on which the building sits $105,000 135,000 122,000 161,000 18,000 3. On December 20, Zonker Company purchased equipment and presented the vendor with a $260,000, zero-interest note due in 2 years. Its prevailing rate for this type of…
Which of the following events is most appropriately recorded as reduction to accumulated depreciation? a. An addition that increases the anticipated benefits of the old asset b. An improvement that extends an asset's useful life c. An improvement that increases the asset's expected benefits beyond that originally expected d. A replacement of a better asset for the one currently used
Of the following, what information is required to calculate depreciation allowances under MACRSGDS? I. Useful life II. First cost. III. Salvage value. IV. Property class a. II and IV only. b. II, III, and IV only. c. I, II, and IV only. d. I, II, III, and IV.