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Exam 9: Plant Assets, Natural Resources, and Intangibles

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Question 61

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If an asset is disposed of during the year, there is no need to calculate depreciation from the beginning of the year of disposal to the date of disposal.

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Question 62

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

A) Net income will be understated.
B) Expenses will be overstated.
C) Assets will be overstated.
D) Liabilities will be overstated.

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Question 63

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Discarding plant assets involves disposing of the asset for no cash.

Carpenters, Inc., a manufacturing company, acquired equipment on January 1, 2017 for $530,000. Estimated useful life of the equipment was seven years and the estimated residual value was $14,000. On January 1, 2020, after using the equipment for three years, the total estimated useful life has been revised to nine total years. Residual value remains unchanged. The company uses the straight-line method of depreciation. Calculate depreciation expense for 2020. (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)

The double-declining-balance method ignores the residual value until the depreciation expense takes the book value below the residual value.

On January 1, 2018, Sanderson, Inc. acquired a machine for $1,110,000. The estimated useful life of the asset is five years. Residual value at the end of five years is estimated to be $91,000. What is the book value of the machine at the end of 2019 if the company uses the straight-line method of depreciation?

The cost of land does not include the cost of fencing and paving.

Which of the following should be included in the cost of land?

Estimated residual value is not depreciated because the company is guaranteed to receive this amount when the asset is sold.

Repair work that generates a capital expenditure because it extends a plant asset's useful life past the normal expected life is known as an extraordinary repair.

Residual value is also known as depreciable cost.

When constructing a building for plant operations, payments for materials, labor, and miscellaneous costs are recorded as expenses.

The expected value of an asset at the end of its useful life is known as ________.

A lump-sum purchase or basket purchase involves paying a single price for several assets as a group.

Plant assets remain on the business's books until they are disposed of.

Which of the following items should be amortized?

When a company makes an accounting change in estimate, Generally Accepted Accounting Principles require that the company make changes to financial statements of prior years.

Which of the following accounting methods is generally used to compute amortization expense?

The cost paid to a laborer to assemble a desk is recorded as an expense.

Millburn Corporation has acquired a property that included both land and a building for $510,000. The corporation hired an appraiser who has determined that the market value of the land is $320,000 and that of the building is $440,000. At what amount should the corporation record the cost of land? (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)