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Exam 10: Plant Assets Natural Resoures and Intangibles

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Question 121

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Anderson Company sold a piece of equipment for $28,000 cash on December 31 after recording the annual depreciation on the asset. The equipment had an original cost of $97,500 and accumulated depreciation of $63,000. Prepare the general journal entry to record the sale of this asset.

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Question 122

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On April 1, Year 1, Raines Co. purchased and placed a plant asset in service. The following information is available regarding the plant asset: Acquisition cost $130,000 Estimated salvage value $15,000 Estimated useful life 5 years Make the necessary adjusting journal entries at December 31, Year 1, and December 31, Year 2 to record depreciation for each year under the double-declining balance depreciation method:

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Question 123

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A change in an accounting estimate is:

Owning a patent:

Explain the impact, if any, on depreciation when estimates that determine depreciation change.

The cost of fees for insuring the title and any accrued property taxes are included in the cost of land.

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 depreciation expense for the first year of its useful life using the double-declining-balance method?

Depletion is the process of allocating the cost of natural resources to periods when they are consumed.

Which of the following statements regarding increases in the value of plant assets under U.S. GAAP and IFRS is true?

On January 1, a machine costing $260,000 with a 6-year life and an estimated $5,000 salvage value was purchased. It was also estimated that the machine would produce 500,000 units during its life. The actual units produced during its first year of operation were 110,000. Determine the amount of depreciation expense for the first year under each of the following assumptions: 1. The company uses the straight-line method of depreciation. 2. The company uses the units-of-production method of depreciation. 3. The company uses the double-declining-balance method of depreciation.

If an asset is sold above its book value, the selling company records a loss.

When an asset is purchased (or disposed of) at a time other than the beginning or the end of an accounting period, depreciation is recorded for part of a year so that the year of purchase or the year of disposal is charged with its share of the asset's depreciation.

Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000. The machine's useful life is estimated to be 5 years, or 300,000 units of product, with a $15,000 salvage value. During its first year, the machine produces 64,500 units of product. -What journal entry would be needed to record the machines' first year depreciation under the units-of-production method?

Revising an estimate of the useful life or salvage value of a plant asset is referred to as a change in accounting estimate and is reflected in the current, and future financial statements.

A company's property records revealed the following information about one of its plant assets: $\begin{array} { | c | c | c | c | l | } \hline \text { Cost } & \begin{array} { l } \text { Salvage } \\\text { Value }\end{array} & \begin{array} { l } \text { Purchase } \\\text { Date }\end{array} & \begin{array} { l } \text { Estimated } \\\text { Iife }\end{array} & \text { Depreciation Method } \\\hline 154,000 & 15,000 & 01 / 01 & 10 \text { years } & \text { Double-declining balance } \\\hline\end{array}$ Calculate the depreciation expense in Year 1 and Year 2 for the year ended December 31. Year 1 ______________________ Year 2 _______________________

The term, obsolescence, as it relates to the useful life of an asset, refers to:

Victory Company purchases office equipment at the beginning of the year at a cost of $15,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 7 years with a $1,000 salvage value. -The book value at the end of 7 years is:

Revenue expenditures are also called balance sheet expenditures.

Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000. The machine's useful life is estimated to be 5 years, or 300,000 units of product, with a $15,000 salvage value. During its first year, the machine produces 64,500 units of product. - Determine the machines' first year depreciation under the units-of-production method.

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 5 years with a $4,000 salvage value. -The book value of the machine at the end of year 2 is: