Short Essay Questions 1.Dorman Company purchased a new web server on January 1. The following information and expenditures related to this acquisition were made: List price $5,000 ...

Short Essay Questions

1.Dorman Company purchased a new web server on January 1. The following information and expenditures related to this acquisition were made:

Specify and justify which of the preceding expenditures should be added to the cost of the web server and disclose that cost. Indicate how the expenditures excluded from the cost of the web server would be classified.

2.Many years ago, a well-known American company publicly advertised with the slogan "Our most important asset is our employees". More recently, other companies have realized that quality employees working in an excellent work environment that respects those employees produce quality products at a reasonable cost. Although this may be the foundation for American companies to become more internationally competitive, on the balance sheet and in your chapter on long-lived assets, there is no recognition of an employee asset. Why is there not an asset on the balance sheet that recognizes the contribution of employees to the future profit-making ability of a firm?

3.On January 1, 2009, Tavis Corp. sold a piece of equipment for $10,000 that it had used for several years. The equipment had cost $50,000, and the accumulated depreciation account had a balance of $34,000 at the time of the sale. Describe the effects on the accounting equation of selling the equipment.

4.Identify the role of the matching principle in accounting for long-lived assets.

5.What primary objective should management attempt to accomplish when selecting the depreciation method for tax purposes?

6.What problems are inherent in recording trade-ins of plant assets?