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Exam 9: Plant Assets, Natural Resources, and Intangible Assets

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Question 31

Multiple Choice

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Orr Corporation sold equipment for $30,000. The equipment had an original cost of $90,000 and accumulated depreciation of $45,000. As a result of the sale,

A) net income will increase $30,000.
B) net income will increase $15,000.
C) net income will decrease $15,000.
D) net income will decrease $30,000.

E) B) and C)
F) A) and B)

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Question 32

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Gains on an exchange of plant assets that has commercial substance are

A) deducted from the cost of the new asset acquired.
B) deferred.
C) not possible.
D) recognized immediately.

E) All of the above
F) B) and C)

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Question 33

Multiple Choice

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When estimating the useful life of an asset, accountants do not consider

Equipment costing $70,000 with a salvage value of $14,000 and an estimated life of 8 years has been depreciated using the straight-line method for 2 years. Assuming a revised estimated total life of 5 years and no change in the salvage value, the depreciation expense for year 3 would be

A truck that cost $72,000 and on which $60,000 of accumulated depreciation has been recorded was disposed of for $18,000 cash. The entry to record this event would include a

Lynn Company owns equipment that cost $120,000 when purchased on January 1, 2015. It has been depreciated using the straight-line method based on estimated salvage value of $15,000 and an estimated useful life of 5 years. Instructions Prepare Lynn Company's journal entries to record the sale of the equipment in these four independent situations. (a) Sold for $58,000 on January 1, 2018. (b) Sold for $58,000 on May 1, 2018. (c) Sold for $32,000 on January 1, 2018. (d) Sold for $32,000 on October 1, 2018.

Dougan Company purchased equipment on January 1, 2017 for $90,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 5-year useful life. It is also estimated that the equipment will produce 100,000 units over its 5-year life. Instructions Answer the following independent questions. 1. Compute the amount of depreciation expense for the year ended December 31, 2017, using the straight-line method of depreciation. 2. If 16,000 units of product are produced in 2017 and 24,000 units are produced in 2018, what is the book value of the equipment at December 31, 2018? The company uses the units-of-activity depreciation method. 3. If the company uses the double-declining-balance method of depreciation, what is the balance of the Accumulated Depreciation-Equipment account at December 31, 2019?

A company has the following assets: The total amount reported under Property, Plant, and Equipment would be

The cost of a patent must be amortized over a 20-year period.

Once an asset is fully depreciated, no additional depreciation can be taken even though the asset is still being used by the business.

The depreciable cost of a plant asset is its original cost minus obsolescence.

If disposal of a plant asset occurs during the year, depreciation is

A truck costing $110,000 was destroyed when its engine caught fire. At the date of the fire, the accumulated depreciation on the truck was $50,000. An insurance check for $125,000 was received based on the replacement cost of the truck. The entry to record the insurance proceeds and the disposition of the truck will include a

Equipment was purchased for $300,000. Freight charges amounted to $14,000 and there was a cost of $40,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $60,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be

A machine with a cost of $480,000 has an estimated salvage value of $30,000 and an estimated useful life of 5 years or 15,000 hours. It is to be depreciated using the units-of-activity method of depreciation. What is the amount of depreciation for the second full year, during which the machine was used 5,000 hours?

Mott Company uses the units-of-activity method in computing depreciation. A new plant asset is purchased for $48,000 that will produce an estimated 100,000 units over its useful life. Estimated salvage value at the end of its useful life is $4,000. What is the depreciation cost per unit?

Equipment with a cost of $400,000 has an estimated salvage value of $25,000 and an estimated life of 4 years or 15,000 hours. It is to be depreciated using the units-of-activity method. What is the amount of depreciation for the first full year, during which the equipment was used 3,300 hours?

On March 1, 2015, Landon Company acquired real estate on which it planned to construct a small office building. The company paid $90,000 in cash. An old warehouse on the property was razed at a cost of $7,600; the salvaged materials were sold for $1,700. Additional expenditures before construction began included $1,100 attorney's fee for work concerning the land purchase, $4,000 real estate broker's fee, $7,800 architect's fee, and $14,000 to put in driveways and a parking lot. Instructions Determine the amount to be reported as the cost of the land.

Cost allocation of an intangible asset is referred to as

The book value of a plant asset is the amount originally paid for the asset less anticipated salvage value.