Chapter 10 -12 Review Questions



Chapter 10 -11 Review Questions

1. Define Capital Asset

2. Differentiate between a Tangible and Intangible Capital Asset.

3. List 5 examples of tangible capital assets.

4. List 3 examples of intangible capital assets.

5. What costs must be included in the cost of a capital asset aside from the purchase price.

6. What are land improvements? List 4 examples.

7. A piece of machinery is purchased for $25,000 and has a 5 year useful life. After the 5 years the machinery will have a residual value of $5000. Calculate the yearly amortization for the first 3 years using the straight-line method.

8. An Industrial Furnace was purchased for $135,000 and amortizes at the rate of 20% per year. Prepare an amortization schedule for the first 3 year using the declining balance method.

9. A truck was purchased for $40,000 and will have residual value of $500. This truck will have a useful life of 250,000 km. Calculate the yearly amortization using the units-of-activity method if:

a. Year one: 30,000 km

b. Year two: 15,000 km

10. A piece of machinery has a historical cost of $30,000 and Accumulated Amortization of $27,000. Prepare the journal entry if:

a. The machinery is thrown out.

b. The machinery is sold for $6,000

c. The machinery is sold for $2,500

11. A describe the difference in amortization of a Natural Resource and a typical capital Asset.

12. Gold Co. owns a gold mine in Northern Ontario, the mine was purchased for $30,000,000 and will have a residual value $2,000,000. The mine is estimated to have approximately 10,000 tons of gold. After the mine is stripped, Gold Co. must return the land to its natural condition, which will cost $500,000.

- Prepare the journal entry for the years one and two if:

a. Year One: 500 tons mined and sold

b. Year Two: 1500 tons mined and sold.

13. What method of amortization is used for intangible capital assets?

14. Panasonic buys the patent for the Green-Ray Player (the successor to the blue-ray) for $550,000. Its estimated useful life will be 10 years.

a. Prepare the yearly amortization journal transaction.

15. Why is Accelerated Amortization sometimes used for capital assets.

16. Prepare an amortization schedule for the first three years for the Industrial Furnace from question 8, using the Double-Declining Balance Method.

17. Define Current Liability

18. What are the major types of current liabilities?

19. ABC Inc. took out an $8000, 6 month, 6.35% note payable on Jan 1, 06. What is the journal entry if the note payable is paid off at maturity?

20. Eg. Sarah cuts Sally’s hair for $15.00 plus GST (5%) and PST (8%). Sally pays in cash. Journalize this transaction.

21. Leon purchases a new computer for $850, plus GST (5%) and PST(8%). Leon pays in cash. Journalize this transaction.

22. Payroll Example

|Name |Hours Worked |Rate of Pay |CPP |EI |Income Tax |Medical |United Way |

| | | | | | |Insurance | |

|A. Dudeck |38 |15 |23.40 |9.60 |225.30 |25 |5 |

|J. Delion |45 |14.50 |31.43 |10.50 |311.40 |25 |5 |

|S. Chadha |43 |20 |33.31 |11.25 |332.22 |25 |10 |

Additional Info

• Employees are paid time and a half their normal wage for every hour worked over 40 hours.

• The employer with matches any contribution to medical insurance and charity.

a. Journalize the weekly payroll and accrual of benefits.

b. Journalize the payment of payroll.

c. Journalize the payment to the Receiver General.

d. Journalize the payment to the Insurance Company.

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