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Exam 8: Operating Assets: Property, Plant and Equipment, and Intangibles

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Question 21

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Calhoun, Inc.purchased equipment at the beginning of 2016 for $180,000.Calhoun decided to depreciate the equipment over a 5-year period using the double-declining-balance method.Calhoun estimated the equipment's residual value at $30,000.Which of the following statements is correct concerning Rose's financial statements at December 31, 2016?

A) The book value of the equipment is $108,000.
B) The book value of the equipment is $72,000.
C) The total accumulated depreciation is $90,000.
D) Depreciation expense for 2016 is $60,000.

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Question 22

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A company should choose a depreciation method that

A) best allocates the original cost of the asset to the periods benefited by the use of the asset.
B) saves the most taxes.
C) minimizes net income
D) shows the highest amount of net income.

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Question 23

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The income statement of Hope Market, Inc.reported a gain from the sale of land.How are the cash flow effects of this transaction reported on the statement of cash flows if the direct method is used to prepare the Operating Activities category?

Given below are several accounts and balances from Carrier Corporation's 2016 financial statements.Prepare the Property, Plant, and Equipment section of the balance sheet and a partial income statement in the space provided below using the accounts provided. $\begin{array}{lr}\text { Depreciation expense } & \$ 59,800 \\\text { Accumulated depreciation } & 257,400 \\\text { Gain on sale of plant asset } & 19,500 \\\text { Building } & 585,000 \\\text { Land } & 120,000 \\\text { Cash received from sale of plant asset } & 52,000\end{array}$ $\begin{array}{l}\text { BALANCE SHEET } &\text { INCOME STATEMENT }\\\hline\end{array}$ ​

How should intangible assets be disclosed on the balance sheet?

Research and development costs are

On January 1, 2016, Petersen Corp.sold a piece of equipment for $3,000 which it had used for several years.The equipment had cost $13,000, and its accumulated depreciation amounted to $9,000 at the time of the sale.What are the net effects on the accounting equation of selling the equipment?

Blanket Airlines acquires a new aircraft.It has an estimated life of 15 years and should be used for 15,000 hours of flight.What is the most appropriate method of depreciation to properly match revenues and expenses?

Norwood, Inc.purchased a crane at a cost of $80,000.The crane has an estimated residual value of $5,000 and an estimated life of 8 years, or 12,500 hours of operation.The crane was purchased on January 1, 2016 and was used 2,700 hours in 2016 and 2,600 hours in 2017. ​ -Refer to the information for Norwood, Inc, ​ Based on this information, what method of depreciation will produce the maximum depreciation expense in 2017?

Wexford Co.purchased a new delivery truck at the beginning of 2016.The truck has a cost of $37,000, an estimated life of 5 years, and an estimated residual value of $7,000.A full year's depreciation expense is to be recorded in 2016.The truck was driven 20,000 miles during 2016 and 24,000 miles during 2017.The number of expected miles over five years is 100,000. ​ -Refer to information for Wexford Co. ​ What is the amount by which double-declining-balance depreciation exceeds straight-line depreciation over the 5-year life of the truck?

Acquisition cost includes all of the costs that are normal and necessary to acquire and maintain a plant asset over its useful life.

On January 2, 2016, Hannah Company sold a machine for $1,000 that it had used for several years.The machine cost $12,000, and had accumulated depreciation of $9,000 at the time of sale.What gain or loss will be reported on the income statement for the sale of the machine?

Costs incurred to keep assets in normal operating condition are called revenue expenditures.

Double-declining-balance depreciation is most commonly used by businesses for financial reporting purposes.

Select the account that would be increased to show each of the following costs. -The transportation charges related to the acquisition costs of a new piece of machinery

One reason management may choose the straight-line method of depreciation is because it is easy to compute.

Acquisition cost should not include expenditures unrelated to the acquisition, like repair costs for damages incurred during installation, or costs incurred after the asset was installed and use begun.

All of the following statements are true except:

Flexibility in valuation of property, plant, and equipment under IFRS may cause problems with comparability of one company with another.

Mayflower Company had a machine with a cost of $123,000 and accumulated depreciation of $87,000 that was sold at for a gain of $5,000.What amount of cash was received from the sale?