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Exam 10: Plant Assets Natural Resoures and Intangibles

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Question 41

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McClintock Co. had the following transactions involving plant assets during Year 1. Unless otherwise indicated, all transactions were for cash. Jan. 2 Purchased a truck for $70,000 plus sales taxes of $3,000. The truck is expected to have a $14,000 salvage value and a 4 year life. Jan. 3 Paid $2,500 to have the company's logo painted on the truck. This did not change the truck's salvage value. Dec. 31 Recorded straight-line depreciation on the truck. Prepare the general journal entries to record these transactions.

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Question 42

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

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Question 43

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A building was purchased for $370,000 and depreciated for ten years on a straight-line basis under the assumption it would have a twenty-year life and a $10,000 salvage value. At the beginning of the building's eleventh year it was recognized the building had eight years of remaining life instead of ten and that at the end of the remaining eight years its salvage value would be $16,000. What amount of depreciation should be recorded in each of the building's remaining eight years?

Explain how to calculate total asset turnover. Describe what it reveals about a company's financial condition, whether a higher or lower ratio is desirable, and how it is best applied for comparative purposes.

Which of the following is not classified as plant assets?

Explain the difference between revenue expenditures and capital expenditures and how they are recorded in the accounting system.

A company purchased a tract of land for its natural resources at a cost of $1,500,000. It expects to mine 2,000,000 tons of ore from this land. The salvage value of the land is expected to be $250,000. The depletion expense per ton of ore is:

Plant assets are defined as:

A company purchased and installed equipment on January 1 at a total cost of $72,000. Straight-line depreciation was calculated based on the assumption of a five-year life and no salvage value. The equipment was disposed of on July 1 of the fourth year. The company uses the calendar year. 1. Prepare the general journal entry to update depreciation to July 1 in the fourth year. 2. Prepare the general journal entry to record the disposal of the equipment under each of these three independent situations: a. The equipment was sold for $22,000 cash. b. The equipment was sold for $15,000 cash. c. The equipment was totally destroyed in a fire and the insurance company settled the claim for $18,000 cash.

A machine costing $75,000 is purchased on September 1, Year 1. The machine is estimated to have a salvage value of $10,000 and an estimated useful life of 4 years. Double-declining-balance depreciation is used. If the machine is sold on December 31, Year 3 for $13,000, the journal entry to record the sale will include:

The double-declining balance method is applied by (1) computing the asset's straight-line depreciation rate, (2) doubling it, (3) subtracting salvage value from cost, and (4) multiplying the rate times the net value.

The specific meaning of goodwill in accounting is:

A leasehold is:

The depreciation method that recognizes equal amounts of annual depreciation over the life of an asset is ________.

Revenue expenditures to keep an asset in normal, good operating condition; they are necessary if an asset is to perform to expectations over its useful life are called ________.

The relevant factors in computing depreciation do not include:

A company's property records revealed the following information about its plant assets: $\begin{array} { | l | r | r | l | l | l | } \hline \begin{array} { l } \text { Machine } \\\text { No. }\end{array} & { \text { Cost } } & \begin{array} { l } \text { Salvage } \\\text { Value }\end{array} & \begin{array} { l } \text { Purchase } \\\text { Date }\end{array} & \begin{array} { l } \text { Estimated } \\\text { Life }\end{array} & \text { Depreciation Method } \\\hline 1 & \$ 82,000 & \$ 8,000 & 1 / 01 & 4 \text { years } & \text { Straight-line } \\\hline 2 & 46,000 & 3,600 & 7 / 01 & 5 \text { years } & \text { Double-declining balanes } \\\hline\end{array}$ Calculate the depreciation expense for each machine in Year 1 and Year 2 for the year ended December 31. Machine 1: Year 1______________________ Year 2 _______________________ Machine 2: Year 1 ______________________ Year 2 _______________________

Merchant Company purchased property for a building site. The costs associated with the property were: $\begin{array}{lr}\text { Purchase price } & \$ 185,000 \\\text { Real estate commissions } & 15,000 \\\text { Legal fees } & 700 \\\text { Expenses of clearing the land } & 2,000 \\\text { Expenses to remove old building } & 4,000\end{array}$ What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?

A company purchased equipment valued at $66,000. It traded in old equipment for a $9,000 trade-in allowance and the company paid $57,000 cash with the trade-in. The old equipment cost $44,000 and had accumulated depreciation of $36,000. This transaction has commercial substance. What is the recorded value of the new equipment?

Total asset turnover is used to evaluate: