7 eBook Show Me How Depletion Entries Backwoods Mining Co acquired mineral rights for $25,126,000 The mineral deposit is estimated at 147,800,000 tons During the current year, 22,150,000 tons were mined and sold a Determine the amount of depletion expense for the current year Round the depletion rate to two decimal places $fill in the blank 4108a6f97fd7053 1 Feedback Similar to the units of production method to depreciate a fixed asset, the depletion rate that is calculated stays constant no matter how much of the natural resource is extracted b Journalize the adjusting entry on December 31 to recognize the depletion expense If an amount box does not require an entry, leave it blank Depletion Expense fill in the blank 709306001fb0fa3 2 fill in the blank 709306001fb0fa3 3 Accumulated Depletion fill in the blank 709306001fb0fa3 5 fill in the blank 709306001fb0fa3 6 8 eBook Show Me How Amortization Entries Kleen Company acquired patent rights on January 10 of Year 1 for $464,000 The patent has a useful life equal to its legal life of eight years On January 7 of Year 4, Kleen successfully defended the patent in a lawsuit at a cost of $23,000 If required, round your answers to the nearest dollar a Determine the patent amortization expense for Year 4 ended December 31 $fill in the blank 56d315fae038fa2 1 Feedback For intangible assets with finite lives, a company uses the straight line method to calculate amortization If a company successfully defends a patent it becomes part of the cost of the patent If the company loses a lawsuit regarding a patent infringement, then the patent is written off b Journalize the adjusting entry on December 31 of Year 4 to recognize the amortization If an amount box does not require an entry, leave it blank Amortization Expense Patents fill in the blank 10191209601efb4 2 fill in the blank 10191209601efb4 3 Patents fill in the blank 10191209601efb4 5 fill in the blank 10191209601efb4 6 9 Book Value of Fixed Assets Cannington, Inc , designs, manufactures, and markets personal computers and related software The following information was taken from a recent annual report of Cannington Property, Plant, and Equipment (in millions) Current Year Preceding Year Land and buildings $761,520 $441,682 Machinery, equipment, and internal use software 723,444 571,140 Other fixed assets related to leases 921,439 692,983 Accumulated depreciation and amortization (967,130) (807,211) a Compute the book value of the fixed assets for the current year and the preceding year Current year book value $fill in the blank 1 Preceding year book value $fill in the blank 2 A comparison of the book values of the current and preceding years indicates that they increased A comparison of the total cost and accumulated depreciation reveals that Cannington purchased $fill in the blank 4 million of additional fixed assets, which was offset by the additional depreciation expense of $fill in the blank 5 million taken during the current year b Would you normally expect the book value of fixed assets to increase or decrease during the year Increase 12 Fixed Asset Turnover Ratio Verizon Communications Inc is a major telecommunications company in the United States Two recent balance sheets for Verizon disclosed the following information regarding fixed assets End of Year (in millions) Beginning of Year (in millions) Property, plant, and equipment $252,835 $246,498 Less accumulated depreciation 163,549 157,930 Property, plant, and equipment (net) $ 89,286 $ 88,568 Verizons revenue for the year was $130,863 million Assume that the fixed asset turnover ratio for the telecommunications industry averages approximately 1 1 a Determine Verizons fixed asset turnover ratio Round to one decimal place fill in the blank 1 b Interpret this ratio with respect to the industry average Verizon earns more revenue per dollar of fixed assets as compared to the industry average Thus Verizon is using its fixed assets more efficiently Verizon earns less revenue per dollar of fixed assets as compared to the industry average Thus Verizon is not using its fixed assets more efficiently Verizons fixed asset turnover is same as the industry average Thus Verizon is using its fixed assets as efficiently as the any other company in the industry

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7. eBook Show Me How Depletion Entries Backwoods Mining Co. acquired mineral rights for $25,126,000. The mineral deposit is estimated at 147,800,000 tons. During the

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Depletion Entries

Backwoods Mining Co. acquired mineral rights for $25,126,000. The mineral deposit is estimated at 147,800,000 tons. During the current year, 22,150,000 tons were mined and sold.

a. Determine the amount of depletion expense for the current year. Round the depletion rate to two decimal places. $fill in the blank 4108a6f97fd7053_1

Feedback

Similar to the units-of-production method to depreciate a fixed asset, the depletion rate that is calculated stays constant no matter how much of the natural resource is extracted.

b. Journalize the adjusting entry on December 31 to recognize the depletion expense. If an amount box does not require an entry, leave it blank.

	Depletion Expense	fill in the blank 709306001fb0fa3_2	fill in the blank 709306001fb0fa3_3
	Accumulated Depletion	fill in the blank 709306001fb0fa3_5	fill in the blank 709306001fb0fa3_6

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Amortization Entries

Kleen Company acquired patent rights on January 10 of Year 1 for $464,000. The patent has a useful life equal to its legal life of eight years. On January 7 of Year 4, Kleen successfully defended the patent in a lawsuit at a cost of $23,000.

If required, round your answers to the nearest dollar.

a. Determine the patent amortization expense for Year 4 ended December 31. $fill in the blank 56d315fae038fa2_1

Feedback

For intangible assets with finite lives, a company uses the straight-line method to calculate amortization. If a company successfully defends a patent it becomes part of the cost of the patent. If the company loses a lawsuit regarding a patent infringement, then the patent is written off.

b. Journalize the adjusting entry on December 31 of Year 4 to recognize the amortization. If an amount box does not require an entry, leave it blank.

	Amortization Expense-Patents	fill in the blank 10191209601efb4_2	fill in the blank 10191209601efb4_3
	Patents	fill in the blank 10191209601efb4_5	fill in the blank 10191209601efb4_6

Book Value of Fixed Assets

Cannington, Inc., designs, manufactures, and markets personal computers and related software. The following information was taken from a recent annual report of Cannington:

Property, Plant, and Equipment (in millions):
	Current Year	Preceding Year
Land and buildings	$761,520	$441,682
Machinery, equipment, and internal-use software	723,444	571,140
Other fixed assets related to leases	921,439	692,983
Accumulated depreciation and amortization	(967,130)	(807,211)

a. Compute the book value of the fixed assets for the current year and the preceding year.

Current year book value	$fill in the blank 1
Preceding year book value	$fill in the blank 2

A comparison of the book values of the current and preceding years indicates that they increased . A comparison of the total cost and accumulated depreciation reveals that Cannington purchased $fill in the blank 4 million of additional fixed assets, which was offset by the additional depreciation expense of $fill in the blank 5 million taken during the current year.

b. Would you normally expect the book value of fixed assets to increase or decrease during the year? Increase

12.

Fixed Asset Turnover Ratio

Verizon Communications Inc. is a major telecommunications company in the United States. Two recent balance sheets for Verizon disclosed the following information regarding fixed assets:

	End of Year (in millions)		Beginning of Year (in millions)
Property, plant, and equipment		$252,835		$246,498
Less accumulated depreciation		163,549		157,930
Property, plant, and equipment (net)		$ 89,286		$ 88,568

Verizons revenue for the year was $130,863 million. Assume that the fixed asset turnover ratio for the telecommunications industry averages approximately 1.1.

a. Determine Verizons fixed asset turnover ratio. Round to one decimal place. fill in the blank 1

b. Interpret this ratio with respect to the industry average.

Verizon earns more revenue per dollar of fixed assets as compared to the industry average. Thus Verizon is using its fixed assets more efficiently.
Verizon earns less revenue per dollar of fixed assets as compared to the industry average. Thus Verizon is not using its fixed assets more efficiently.
Verizons fixed asset turnover is same as the industry average. Thus Verizon is using its fixed assets as efficiently as the any other company in the industry.