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Exam 10: Plant Assets, Natural Resources, and Intangible Assets

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Question 71

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Conceptually, the cost allocation procedures for natural resources parallels that of plant assets.

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Question 72

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On October 1, 2010, Holt Company places a new asset into service. The cost of the asset is $60,000 with an estimated 5-year life and $15,000 salvage value at the end of its useful life. What is the depreciation expense for 2010 if Holt Company uses the straight-line method of depreciation?

A) $2,250
B) $12,000
C) $3,000
D) $6,000

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Question 73

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Costs incurred to increase the operating efficiency or useful life of a plant asset are referred to as

Equipment with an invoice price of $20,000 was purchased and freight costs were $900. The cost of the equipment would be $______________.

The cost of successfully defending a patent in an infringement suit should be

Miley Enterprises sold equipment on January 1, 2010 for $5,000. The equipment had cost $24,000. The balance in Accumulated Depreciation at January 1 is $20,000. What entry would Robot make to record the sale of the equipment?

Natural resources are generally shown on the balance sheet under

A gain on sale of a plant asset occurs when the proceeds of the sale are greater than the

On a balance sheet, natural resources may be described more specifically as all of the following except

Identify the following expenditures as capital expenditures or revenue expenditures. (a) Replacement of worn out gears on factory machinery. (b) Construction of a new wing on an office building. (c) Painting the exterior of a building. (d) Oil change on a company truck. (e) Replacing a Pentium II computer chip with a Pentium IV chip, which increases productive capacity. No extension of useful life expected. (f) Overhaul of a truck motor. One year extension in useful life is expected. (g) Purchased a wastebasket at a cost of $10. (h) Painting and lettering of a used truck upon acquisition of the truck.

Guardado Company purchased a new machine for $300,000. It is estimated that the machine will have a $30,000 salvage value at the end of its 5-year useful service life. The double-declining-balance method of depreciation will be used. Instructions Prepare a depreciation schedule which shows the annual depreciation expense on the machine for its 5-year life.

Tomko Company purchased machinery with a list price of $32,000. They were given a 10% discount by the manufacturer. They paid $200 for shipping and sales tax of $1,500. Tomko estimates that the machinery will have a useful life of 10 years and a residual value of $10,000. If Tomko uses straight-line depreciation, annual depreciation will be

______________ is the process of allocating the cost of a plant asset to expense over its service life in a rational and systematic manner.

Colaw Company exchanges equipment with Eaton Company and Mantle Company exchanges equipment with Fiero Company. The following information pertains to the exchanges: Instructions Prepare the journal entries to record the exchanges on the books of Colaw Company and Mantle Company. The transaction has commercial substance.

A computer company has $2,000,000 in research and development costs. Before accounting for these costs, the net income of the company is $1,600,000. What is the amount of net income or loss after these R & D costs are accounted for?

The IRS does not require the taxpayer to use the same depreciation method on the tax return that is used in preparing financial statements.

The entry to record depletion expense

The fair market value of a plant asset is always the same as its book value.

Kingston Company purchased a piece of equipment on January 1, 2010. The equipment cost $80,000 and had an estimated life of 8 years and a salvage value of $10,000. What was the depreciation expense for the asset for 2011 under the double-declining-balance method?

The book value of a plant asset is obtained by subtracting ______________ from the ______________ of the plant asset.