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Exam 10: Plant Assets, Natural Resources, and Intangibles

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Question 21

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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.

A) True
B) False

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Question 22

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On July 1 of the current year, a company purchased and placed in service a machine with a cost of $240,000. The company estimated the machine's useful life to be four years or 60,000 units of output with an estimated salvage value of $60,000. During the current year, 15,000 units were produced. Prepare the necessary December 31 adjusting journal entry to record depreciation for the current year assuming the company uses: a. The straight-line method of depreciation. b. The units-of-production method of depreciation. c. The double-declining balance method of depreciation.

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a. The straight-line method of depreciat...

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Question 23

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On April 1, 2010, a company discarded a computer that cost $15,000 and that had a useful life of 4 years, and a salvage value of $1,000. Based on straight-line depreciation, the accumulated depreciation as of December 31, 2009 was $10,700. a. Prepare the journal entry to record depreciation up to the date of disposal of the computer. b. Prepare the journal entry to record the disposal of the computer.

Thomas Enterprises purchased a depreciable asset on October 1, Year 1 at a cost of $100,000. The asset is expected to have a salvage value of $15,000 at the end of its five-year useful life. If the asset is depreciated on the double-declining-balance method, the asset's book value on December 31, Year 3 will be:

Plant assets are used in operations and have useful lives that extend over more than one accounting period.

A copyright gives its owner the exclusive right to publish and sell a musical, literary, or artistic work during the life of the creator plus 17 years.

Huffington Company traded in an old delivery truck for a new one. The old truck had a cost of $75,000 and accumulated depreciation of $60,000. The new truck had an invoice price of $125,000. Huffington was given a $12,000 trade-in allowance on the old truck, which meant they paid $113,000 in addition to the old truck to acquire the new truck. If this transaction has commercial substance, what is the recorded value of the new truck?

Compare the different depreciation methods (straight-line, units-of-production, and double-declining-balance) with respect to the computation of depreciation per period and the total depreciation over the life of the asset.

What are the general accounting procedures for recording asset disposals?

A company needed a new building. It found a suitable location with an existing old building on the land. The company reached an agreement to buy the land and the building for $960,000 cash. The old building was demolished to make way for the needed new building. Following is information regarding the demolition of the old building and construction of the new one: Prepare a single journal entry to record the above costs assuming all transactions are paid in cash.

What is depreciation of plant assets? What are the factors to consider in computing depreciation?

Plant assets refer to intangible assets that are used in the operations of a business.

The Modified Accelerated Cost Recovery System (MACRS) is part of the U.S. federal income tax laws and is used for tax reporting.

Define plant assets and identify the four primary issues in accounting for them.

A company's old machine that cost $40,000 and had accumulated depreciation of $30,000 was traded in on a new machine having an estimated 20-year life with an invoice price of $50,000. The company also paid $43,000 cash, along with its old machine to acquire the new machine. If this transaction has commercial substance, the new machine should be recorded at:

Once the estimated depreciation expense for an asset is calculated:

On April 1, Year 1, SAS Corp. purchased and placed in service a plant asset. The following information is available regarding the plant asset: Make the necessary adjusting journal entries at December 31, Year 1, and December 31, Year 2 to record depreciation for each year under the following depreciation methods: a. Straight-line. b. Double-declining-balance.

During the current year, a company exchanged an old truck costing $58,000 with accumulated depreciation of $52,000 for a new truck. The new truck had a cash price of $80,000 and the company received a $16,000 trade-in allowance on the old truck with the balance of $64,000 paid in cash. Prepare the journal entry to record the exchange, assuming the transaction lacked commercial substance.

Depreciation:

It is not necessary to report both the cost and the accumulated depreciation of plant assets in the financial statements.