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Exam 10: Plant Assets, Natural Resources, and Intangibles

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Question 1

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The depreciation method that charges a varying amount to expense for each period of an asset's useful life depending on its usage is ________________________________.

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Question 2

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The depreciation method that produces larger depreciation expense during the early years of an asset's life and smaller expense in the later years is a(an) :

A) Accelerated depreciation method.
B) Book value depreciation method.
C) Straight-line depreciation method.
D) Units-of-production depreciation method.
E) Unrealized depreciation method.

F) A) and B)
G) A) and C)

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Question 3

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The Oberon Company purchased a delivery truck for $95,000 on January 2.The truck was estimated to have a $3,000 salvage value and a 4 year life.The truck was depreciated using the straight-line method.At the beginning of the third year,it was obvious that the truck's total useful life would be 6 years rather than 4,and the salvage at the end of the 6th year would be $1,500.Determine the depreciation expense for the truck for the 6 years of its life.

Marlow Company purchased a point of sale system on January 1 for $3,400.This system has a useful life of 10 years and a salvage value of $400.What would be the book value of the asset at the end of the first year of its useful life using the double-declining-balance method?

Which of the following is an example of an extraordinary repair?

A company sold equipment that originally cost $100,000 for $60,000 cash.The accumulated depreciation on the equipment was $40,000.The company should recognize a:

Salvage value is:

A company purchased a tract of land for its natural resources at a cost of $1,000,000.It expects to harvest 5,000,000 board feet of timber from this land.The salvage value of the land is expected to be $200,000.The depletion expense per board foot of timber is:

Extraordinary repairs:

A company purchased store equipment for $4,300 by trading in old equipment with a cost of $2,000 and that had accumulated depreciation of $1,900 as of the exchange date.The company received a $75 trade-in allowance for the old equipment with the balance of $4,225 paid in cash.Prepare the journal entry to record the exchange,assuming the transaction had commercial substance.

The total cost of an asset less its accumulated depreciation is called:

A total asset turnover ratio of 3.5 indicates that:

Riverboat Adventures pays $310,000 plus $15,000 in closing costs to buy out a competitor.The real estate consists of land appraised at $35,000,a building appraised at $105,000,and paddleboats appraised at $210,000.Compute the cost that should be allocated to the building.

The federal income tax rules for depreciating assets are known as ___________________________.

The relevant factors in computing depreciation do not include:

A machine originally had an estimated useful life of 6 years,but after 4 complete years,it was decided that the original estimate of useful life should have been 10 years.At that point the remaining cost to be depreciated should be allocated over the remaining:

A company made the following expenditures in connection with the construction of a new building: Prepare a schedule showing the amounts to be recorded as Land,Buildings,and Machinery.

Additional costs of plant assets that do not materially increase the asset's life or productive capabilities are recorded as ______________________________.

Wallace Company had a building that was destroyed by fire.The building originally cost $650,000,and its accumulated depreciation as of the date of the fire was $300,000.The company received $320,000 cash from an insurance policy that covered the building and will use that money to help rebuild.Prepare the single journal entry to record the disposal of the building and the receipt of cash from the insurance company.

On April 1 of the current year,a company traded an old machine that originally cost $32,000 and that had accumulated depreciation of $24,000 for a similar new machine that had a cash price of $40,000. 1.Prepare the entry to record the exchange under the assumption that a $5,000 trade-in allowance was received and the balance of $35,000 was paid in cash.Assume the exchange transaction had commercial substance. 2.Prepare the entry to record the exchange under the assumption that instead of a $5,000 trade-in allowance,a $12,500 trade-in allowance was received and the balance of $27,500 was paid in cash.Assume the exchange transaction lacked commercial substance.