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Exam 10: Plant Assets, Natural Resources, and Intangibles

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Question 41

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On January 1, 2015, Anodel Inc. acquired a machine for $1,000,000. The estimated useful life of the asset is 5 years. The residual value at the end of 5 years is estimated to be $50,000. What is the book value of the machine at the end of 2016, if the company uses the straight-line method of depreciation?

A) $600,000,
B) $620,000
C) $570,000
D) $550,000

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Question 42

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On July 31, 2015, Colorful Printers purchased a printer for $50,000. It expects the printer to last for four years and have a residual value of $2,000. Compute the depreciation expense on the printer for the year ended December 31, 2015, using the straight-line method.

A) $50,000
B) $5,000
C) $12,500
D) $25,000

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Question 43

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Ordinary repairs to plant assets are referred to as revenue expenditures.

Useful life of a plant asset refers to the period for which it can be used for the purposes of the business.

On June 30, 2015, Regal Furniture discarded a fully depreciated equipment costing $35,000. Journalize the disposal of the equipment.

Which of the following is true of asset turnover ratio?

On October 1, 2015, Nurix Company purchased a patent for $200,000 cash. Although the patent gives legal protection for 20 years, the patent is expected to be used for only 10 years. Journalize the amortization expense for 2015. Assume straight-line amortization.

A company's accountant capitalized a payment that should be recorded as a revenue expenditure. How will this error affect the financial statements of the company?

Iverycoast Inc. purchased a van on January 1, 2015, for $800,000. Estimated life of the van was 5 years, and its estimated residual value was $90,000. Iverycoast uses the straight-line method of depreciation. Calculate the book value of the van at the end of 2015.

Which of the following is the correct accounting treatment for a patent?

According to generally accepted accounting principles, if the fair value of goodwill decreases, an impairment loss must be recorded.

The process by which businesses spread the allocation of a natural resource's cost over its usage is known as depreciation.

Which of the following accounting principles requires businesses to record depreciation?

Fred owns a delivery truck. Which of the following costs, associated with the truck, will be treated as a revenue expenditure?

Briyanne Company purchased a computer for $5,000. During 2015 and 2016, the company recorded total depreciation of $4,000 on the computer. On January 1, 2017, the company traded in the computer for a new one, paying $4,000 cash. The fair market value of the new computer is $6,000. Journalize the company's exchange of computers. Assume the exchange had commercial substance.

On January 1, 2015, Zade Manufacturing Company purchased a machine for $40,000,000. The company expects to use the machine for 24,000 hours over the next 6 years. The estimated sale value of the machine at the end of the sixth year is $40,000. The company used the machine for 3,600 hours in 2015 and 5,000 hours in 2016. What is depreciation expense for the year 2015 if the company uses the units-of-production method of depreciation?

A fully depreciated asset that is still in service must not be reported as an asset on the balance sheet.

Roberts Construction Group paid $5,000, for a plant asset that had a market value of $7,500. At which of the following amounts should the plant asset be recorded?

Which of the following categories of assets should be depreciated?

Server Solutions paid $200,000 to acquire Tabletz Inc., an electronic gadget-advertising website. At the time of the acquisition, Tabletz's balance sheet reported total assets of $200,000 and liabilities of $100,000. The fair market value of Tabletz's assets was $200,000. The fair market value of its liabilities was $100,000. How much goodwill did Server Solutions purchase as part of the acquisition of Tabletz?