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Exam 10: Plant Assets, Natural Resources, and Intangibles

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Question 101

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Natural resources are often called wasting assets because they are physically consumed when used.

A) True
B) False

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Question 102

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On April 1 of the current year, a company disposed of an automobile that had cost $20,000. The auto had a salvage value of $2,000, and a useful life of 5 years. The accounting records showed accumulated depreciation for this automobile of $8,100 as of April 1 of the current year. The asset was discarded after an accident, and $10,500 cash was received from an insurance claim. Prepare the journal entry to record the disposal of the automobile.

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Question 103

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Many companies use an accelerated depreciation method because:

The cost of land can include:

A company sold for $40,000 cash a machine that originally cost $90,000. The accumulated depreciation on this machine was $47,000 at the time of the sale. What was the company's gain or loss on this sale?

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

Salta Company installs a manufacturing machine in its factory at the beginning of the year at a cost of $87,000. The machine's useful life is estimated to be 5 years, or 400,000 units of product, with a $7,000 salvage value. During its second year, the machine produces 84,500 units of product. What journal entry would be needed to record the machines' second year depreciation under the units-of-production method?

______________________ depreciation charges a varying amount to expense for each period of an asset's useful life depending on its usage.

Asset turnover is computed by dividing average total assets by cost of sales.

Depletion:

A company purchased equipment on July 3 of the current year and placed it in service on August 1. The following costs were incurred in acquiring the equipment: Determine the amount to be recorded as cost for the equipment.

A machine originally had an estimated useful life of 5 years, but after 3 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 purchased property for $100,000. The property included a building, a parking lot, and land. The building was appraised at $62,000; the land at $45,000, and the parking lot at $18,000. Land should be recorded in the accounting records with an allocated cost of:

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

Prepare journal entries to record the following transactions of a company during the current year:

Endor Fishing Company exchanged an old boat for a new one. The old boat had a cost of $260,000 and accumulated depreciation of $200,000. The new boat had an invoice price of $400,000. Endor received a trade in allowance of $100,000 on the old boat, which meant the company paid $300,000 in addition to the old boat to acquire the new boat. If this transaction lacks commercial substance, what amount of gain or loss should be recorded on this exchange?

Explain the purpose of and method of depreciation for partial years.

Identify each of the following assets by balance sheet classification by placing an X in the correct classification: Plant Assets, Natural Resources, or Intangibles.

A company purchased a special purpose machine on August 1 of the past year, and it was installed and ready to run on January 1 of this year. The following costs were incurred in the purchase and installation of the machine. Determine the total cost of the machine.

Monte Ray leases office space for $7,000 per month. On January 3, Monte Ray incurs $75,000 to improve his leased office space. These improvements are expected to yield benefits for 8 years. Ray has 6 years remaining on his lease. Compute the amount of expense that should be recorded the first year related to the improvements.