Corporation and Partnership
Chapter 10 Quizzes
Salta Company installs a manufacturing machine in its factory at the beginning of the year at a cost of $87,000. The machine’s useful life is estimated to be 5 years, or 400,000 units of product, with a $7,000 salvage value. During its second year, the machine produces 84,500 units of product. Determine the machines’ second year depreciation under the units of production method:
Answer: $16,900
Cost-Salvage Value/Total units of production
(87,000 – 7,000)/400,000 = .2
.2 * 84,500 = 16,900
Amortization:
Answer: Is the systematic allocation of the cost of an intangible asset to expense over its estimated useful life.
Big River Rafting pays $310,000 plus $15,000 in closing costs to buy out a competitor. The real estate consists of land appraised at $105,000, a building appraised at $210,000 and equipment appraised at $35,000. Compute the cost that should be allocated to the land.
Answer: $97,500
105,000 + 210,000 + 35,000 = 350,000
105,000/350,000 = .3
.3 * 325,000 = 97,500
Leasehold:
Answer: are the rights granted to the lessee by the lessor of a lease.
Copyright:
Answer: Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 70 years.
A patent:
Answer: Gives its owner exclusive right to manufacture and sell a patented item or to use a process for 20 years.
Carmel 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. Compute the depletion expense for the first year assuming 418,000 tons were mined.
Answer: $1,358,500
5,900,000 + 600,000 = 6, 500,000
Cost – Salvage Value/ Total Units of Capacity
6,500,000-0/2000000 = 3.25
3.25 * 418,000 = 1,358,500
Cambria 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.
Salta Company installs a manufacturing machine in its factory at the beginning of the year at a cost of $87,000. The machine’s useful life is estimated to be 5 years, or 400,000 units of product, with a $7,000 salvage value. During its second year, the machine produces 84,500 units of product. Determine the machines’ second year depreciation under the units of production method:
Answer: $16,900
Cost-Salvage Value/Total units of production
(87,000 – 7,000)/400,000 = .2
.2 * 84,500 = 16,900
Amortization:
Answer: Is the systematic allocation of the cost of an intangible asset to expense over its estimated useful life.
Big River Rafting pays $310,000 plus $15,000 in closing costs to buy out a competitor. The real estate consists of land appraised at $105,000, a building appraised at $210,000 and equipment appraised at $35,000. Compute the cost that should be allocated to the land.
Answer: $97,500
105,000 + 210,000 + 35,000 = 350,000
105,000/350,000 = .3
.3 * 325,000 = 97,500
Leasehold:
Answer: are the rights granted to the lessee by the lessor of a lease.
Copyright:
Answer: Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 70 years.
A patent:
Answer: Gives its owner exclusive right to manufacture and sell a patented item or to use a process for 20 years.
Carmel 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. Compute the depletion expense for the first year assuming 418,000 tons were mined.
Answer: $1,358,500
5,900,000 + 600,000 = 6, 500,000
Cost – Salvage Value/ Total Units of Capacity
6,500,000-0/2000000 = 3.25
3.25 * 418,000 = 1,358,500
Cambria 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.