Exam 1: Property, plant and Equipment Intangibles

At December 31,2020,Great Coast Coffee Company's adjusted trial balance shows an espresso machine with a book value of $22,000.As part of the year end procedures GCC completed the asset impairment test on the machine and noted that the recoverable value of the machine was $6,000.Record the impairment loss on the asset.

Impairment can result from a variety of situations that include a significant decline in an asset's market value or a major adverse effect caused by technological,economic,or legal factors.

The half year rule is the partial-year depreciation method that calculates depreciation by determining if the asset was used for more than half of the month.

On October 1 of this year,SportsWorld purchased a delivery van for $23,000 with a residual value of $3,000.The van has an estimated useful life of 5 years.Using straight-line depreciation and the half-year rule,how much depreciation expense should SportsWorld recognize on December 31 of this year?

Explain (1)depreciation for partial years and (2)revision of depreciation when estimates change.

Property,plant and equipment are

Residual value is

Depreciation measures the decline in market value of an asset.

Residual value is an estimate of an asset's value at the end of its useful life.

At the end of the year,SportsWorld completed an asset impairment test and noted that a piece of equipment,with a book value of 12,000,has a recoverable value of $2,000.Calculate the amount of impairment loss on the equipment.

SportsWorld purchased a machine for $190,000.The machine has a useful life of 8 years and a residual value of $10,000.SportsWorld estimates that the machine could produce 750,000 units of product over its useful life.In the first year,95,000 units were produced.In the second year,production increased to 111,000 units.Using the units-of-production method,what is the amount of depreciation that should be recorded for the second year?

CamCo Ltd.leased floor space in a new office building.Rent will cost $10,000 per month for a ten-year lease,but some renovations are needed and will be paid by CamCo to customize the space.The renovations include installing walls to create a new office and boardroom (cost $8,000),new flooring (cost $5,800),painting (cost $1,500)and updated wiring to accommodate computer servers (cost $8,700).How should these costs be handled for accounting purposes by CamCo?

If the book value (or carrying amount)of a PPE item is greater than the amount to be recovered through the asset's use or sale,the asset is said to be

Revenue expenditures are expenditures to keep assets in normal operating condition.

On January 1,2019 a machine costing $330,000 with a 4-year service life and an estimated $3,000 residual value was purchased.It was also estimated that the machine would produce 50,000 units during its life.The actual units produced during its first 2 years of operation were 9,000 and 10,000 respectively.Calculate the amount of depreciation expense for the 2019 and 2020 under each of the following assumptions: (a)Straight-line. (b)Double-declining-balance. (c)Units-of-production.

Explain how each of the following depreciation methods is calculated: straight-line,units-of-production,and double-declining-balance.

Property,plant and equipment can be disposed of by discarding,sale,or exchange of the asset.

Creek Construction purchased a machine for $26,000.It traded in an old machine and received a $4,200 trade-in allowance.The old machine cost $24,000 and had accumulated depreciation of $16,000 to the date of trade-in.At what value should be new asset be recorded?

The appropriate way to amortize goodwill is

Ad Hock had the following property,plant and equipment purchases during 2019: (1)On April 4,equipment costing $250,000 with a 5-year service life and an estimated $40,000 residual value was purchased. (2)On October 4,a machine costing $330,000 with a 5-year service life and an estimated $50,000 residual value was purchased.Assuming Ad Hock has a December 31 year end,prepare the necessary adjusting journal entries at December 31,2019 to record depreciation under the following depreciation methods (using the nearest whole month method): (a)Straight-line (b)Double-declining-balance