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Exam 9: Plant Assets, Natural Resources, and Intangible Assets

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Question 111

Multiple Choice

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Presto Company purchased equipment and these costs were incurred: Presto will record the acquisition cost of the equipment as

A) $22,500.
B) $24,300.
C) $24,620.
D) $25,050.

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Question 112

Multiple Choice

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If a plant asset is retired before it is fully depreciated, and no residual or scrap value is received,

A) a gain on disposal will be recorded.
B) phantom depreciation must be taken as though the asset were still on the books.
C) a loss on disposal will be recorded.
D) no gain or loss on disposal will be recorded.

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Question 113

Multiple Choice

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Salem Company hired Kirk Construction to construct an office building for ₤8,000,000 on land costing ₤2,000,000, which Salem Company owned.The building was complete and ready to be used on January 1, 2011 and it has a useful life of 40 years.The price of the building included land improvements costing ₤600,000 and personal property costing ₤750,000.The useful lives of the land improvements and the personal property are 10 years and 5 years, respectively.Salem Company uses component depreciation, and the company uses straight-line depreciation for other similar assets.What total amount of depreciation expense would Salem Company report on its income statement for the year ended December 31, 2011?

A machine with a cost of $160,000 has an estimated residual value of $10,000 and an estimated useful life of 5 years or 15,000 hours.It is to be depreciated using the units-of-activity method of depreciation.What is the amount of depreciation for the second full year, during which the machine was used 5,000 hours?

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

Additions and improvements are generally

A plant asset must be fully depreciated before it can be removed from the books.

A truck that cost $21,000 and on which $10,000 of accumulated depreciation has been recorded was disposed of for $9,000 cash.The entry to record this event would include a

In recording the acquisition cost of an entire business,

Recording depreciation each period is an application of the expense recognition principle.

Grimwood Trucking purchased a tractor trailer for $147,000.Grimwood uses the units-of-activity method for depreciating its trucks and expects to drive the truck 1,000,000 miles over its 12-year useful life.Residual value is estimated to be $21,000.If the truck is driven 90,000 miles in its first year, how much depreciation expense should Grimwood record?

Under the double-declining-balance method, the depreciation rate used each year remains constant.

The cost of land does not include

The book value of a plant asset is the amount originally paid for the asset less anticipated residual value.

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

The "Revaluation Surplus" account that results from a revaluation of plant assets to fair value is reported on the statement of financial position as a contra account to the plant asset that was revalued.

253 Hadicke Company purchased a delivery truck for $40,000 on January 1, 2011.The truck was assigned an estimated useful life of 5 years and has a residual value of $10,000.Compute depreciation expense using the double-declining-balance method for the years 2011 and 2012.

Tax laws often do not require the taxpayer to use the same depreciation method on the tax return that is used in preparing financial statements.

A plant asset was purchased on January 1 for $40,000 with an estimated residual value of $8,000 at the end of its useful life.The current year's Depreciation Expense is $4,000 calculated on the straight-line basis and the balance of the Accumulated Depreciation account at the end of the year is $20,000.The remaining useful life of the plant asset is

Depreciation is the process of allocating the cost of a plant asset over its useful life in