Exam 1: Property, plant and Equipment Intangibles

Inadequacy refers to

Drilling rights are legal permissions to extract natural resources from the earth and are treated as intangible assets.

If the book value of a property,plant and equipment item is less than the amount to be recovered through the asset's use or sale,the difference is an impairment loss and the asset is described as impaired.

Subsequent capital expenditures

Property,plant and equipment are assets held for sale.

Wilkins Company exchanged its old computer for a newer model.The Old Computer was purchased for $22,000,with related accumulated depreciation of $15,500 to the date of the exchange.The new computer had a cash price of $30,200,and Wilkins Company was given a $7,500 trade-in allowance.This transaction has commercial substance.Prepare the general journal entry to record the exchange,recording the new computer in an account called New Computer.

RoboCop Company paid $31,400 for a machine that was expected to last 5 years and have a residual value of $5,000.During the third year of the machine's life,$3,700 was paid for replacement parts that were expected to increase the machine's productivity by 20% each year.Prepare the general journal entry to record this transaction.

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 20 years.

Any expenditures for legal fees,surveying,and accrued property taxes should not be included in the cost of land.

Natural resources

Wildway Company purchased a heating system on January 2,2008,for $425,000.The system had an estimated useful life of 15 years,with no residual value.On January 2,2020,the company completed a complete renovation of the system at a cost of $43,000 cash,and now expects the system to last 5 years beyond the original estimate.The company uses the straight-line method of depreciation.

Shady Lanes installed automatic sprinkler systems.The electrical work for the installation was $24,000.The invoice price of the sprinkler equipment was $280,000.Additional costs were $5,000 for delivery and $800 for insurance during transportation.During installation a sprinkler line was punctured and was replaced for $200.What is the cost of the sprinkler equipment?

Revenue expenditures are additional costs of property,plant and equipment that provide material benefits extending beyond the current period.

On January 1, 2023, PetraCo ordered a new machine to help increase production for one of its most popular products. The machine had an invoice price of $30,000 and PetraCo was required to pay shipping ($1,200) and insurance during shipping ($300) by boat from British Columbia to Toronto. The machine arrived on January 5, 2019 and was installed at a cost of $800 and calibrated and tested for a cost of $200. On February 1, 2019 it was put into operation. PetraCo's fiscal year runs from January to December. Round all final answers to the nearest dollar. -Prepare a journal entry (or entries)to record all costs associated with the new machine

Depreciation

Capital expenditures are also called balance sheet expenditures.

Property,plant and equipment are

Which of the following statements is true with respect to intangible assets?

The double-declining balance method is applied by (1)calculating the asset's straight-line depreciation rate,(2)doubling it,(3)subtracting residual value from cost,and (4)multiplying the rate times the cost.

Chervinski Industries recently paid $560,000 to buy a building that has an estimated useful life of 40 years and a residual value of $116,000.Calculate the depreciation expense for the third year after acquisition using double-declining-balance depreciation.Assume a full year of depreciation in the first year.