Accounting 2010 Exam 3 Study Questions and Correct Answers

basket purchase the total cost of a combined purchase of land and building, allocated in proportion to their relative market value depreciation a cost allocation process that matches costs of operational assets with periods benefited by their use depreciation expense depreciation for the current year accumulated depreciation total depreciation to date for an asset fixed asset turnover ratio net revenue / avg net fixed assets - measures sales dollars generated by each dollar invested in fixed assets depreciation methods straight line, units-of-product, declining balance (see sticky note! ordinary repairs and maintenance are expensed extraordinary repairs, replacements, and additions are capitalized disposal of tangible assets 1 ) update depreciation to date of disposal 2) record the disposal disposal of tangible assets (gain) dr cash and accumulated depreciation // cr equipment and gain on disposal cash received - book value disposal of tangible assets (loss) dr cash, loss on disposal, and accumulated depreciation // cr cash disposal of tangible assets (example) Cedar Fair sold one of its junior roller coasters for 50,000 cash at the end of its 6th year of use. the equipment originally cost 100,000 and was depreciated using the straight-line method with zero residual value and a useful life of 10 years. the amount of depreciation per year is - (100000 - 0) / 10 years = 10,000 per year. six year accumulated depreciation = 60,000. journal entry for the sale: