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Exam 18: Property, Plant, and Equipment

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Question 21

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The modified accelerated cost recovery system (MACRS)is acceptable for financial accounting purposes because it matches the costs of assets with the revenues produced by those assets.

A) True
B) False

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Question 22

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On, January 2, 2016, Rubble Sand and Gravel Company purchased equipment for $77,000 The equipment was to be used for five years and had a $2,000 estimated residual value. On January 2, 2019, equipment was sold for $30,000. Record the transactions on page 9 of a general journal. Omit descriptions.

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Question 23

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The Modified Accelerated Cost Recovery System (MACRS)is required for----------- purposes.

On January 2, 2019, the Hanover Company purchased some office equipment for $26,000. The equipment is expected to have a useful life of five years and a salvage value of $2,000. Prepare a schedule showing the annual depreciation for each of the first three years of the asset's life under the straight-line method, the double-declining-balance method, and the sum-of-the-years'-digits method.

The acquisition cost of an intangible asset should be charged to expense over the shorter of its legal or useful life, whichever is shorter.

Before an asset is sold, the depreciation must be updated to the date of sale.

If the property used in a business has physical substance and is not real estate it is-----------property.

Book value is used in calculating a gain or loss on the disposal of an asset.

Which method of depreciation is not acceptable for financial accounting purposes?

On, January 2, 2019, Rubble Sand and Gravel Company purchased equipment for $77,000. The equipment was to be used for five years and had a $2,000 estimated residual value. On January 2, 2019, equipment was sold for $35,000. Record the transactions on page 9 of a genera journal. Omit descriptions.

An asset that cost $35,000 was sold for $6,000 cash. Accumulated depreciation on the asset was $29,000. The entry to record this transaction includes the recognition of:

The conservatism principle requires choosing a depreciation method which matches the cost of the asset to the periods when the asset provides benefits to the business.

The amount of a long-term asset's impairment is:

The allocation of the acquisition cost of an intangible asset to expense during its estimated useful life is called----------- .

A company purchased equipment for $16,000 cash. In addition, the company paid $1,120 in sales taxes, $930 to have the equipment delivered and $500 to have it installed. The cost of this asset for financial accounting purposes is:

To calculate declining-balance depreciation, the-------------- of an asset is multiplied by a predetermined appropriate rate.

The allocation of the costs of natural resources, such as minerals, to expense as the resource is extracted is referred to as:

Accelerated depreciation methods allocate greater amounts of depreciation expense in the asset's early years of useful life which provides an investment incentive to businesses to take this non-cash deduction and reduce current period income taxes.

In 2019 a mining company paid $180,000 for mining rights. It is estimated that a total of 225,000 tons of ore are available to be extracted. During 2019, 21,000 tons of ore were mined. What is the amount of Depletion Expense recorded in the adjusting entry for 2019?

Selected transactions of the Harrel Company are listed below. The company uses the straight-line method of depreciation. Record the transactions on page 9 of a general journal. Omit descriptions. 2019 Jan. 5 Purchased office equipment at a price of $6,000 FOB. The freight charge was $48; the installation charge was $200. April 1 Sold warehouse equipment for $5,000 in cash. The equipment was purchased on January 3, 2016, for $18,000. The equipment has a useful life of five years and a salvage value of $1,000. Depreciation was last recorded on December 31, 2018. July 1 Sold office equipment for $2,500 in cash. The equipment was purchased on July 3, 2016, for $3,500. The equipment has a useful life of five years and a salvage value of $500. Depreciation was last recorded on December 31, 2018. 2020 Jan. 2 Traded in office equipment for new equipment that is similar. The list price of the new office equipment is $15,000. Paid $9,000 cash and received a trade-in allowance of $6,000 for the old equipment. The old equipment had been purchased on January 3, 2016, for $12,000. The old equipment had an estimated useful life of five years and a salvage value of $2,000. Depreciation on the old equipment was last recorded on December 31, 2019. (Use the income tax method to record the trade-in.) Jan. 4 Traded in warehouse equipment for new equipment that is similar. The list price of the new warehouse equipment is $26,000. Paid $20,000 cash and received a trade-in allowance of $6,000 for the old equipment. The old equipment had been purchased on January 4, 2016, for $24,000. The old equipment had an estimated useful life of five years and a salvage value of $4,000. Depreciation on the old equipment was last recorded on December 31, 2020. (Use the fair market value method to record the trade-in.)