Exam 9: Property, Plant and Equipment Intangibles

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.

Goodwill is not depreciated or amortized but is instead decreased only if its value has been determined by management to be impaired.

SportsWorld purchased equipment costing $10,000. The equipment has a residual value of $1,000, and an estimated useful life of 5 years or 36,000 shoes. Actual units produced during the year were 7,000 units. Calculate annual depreciation using the straight line method.

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?

SportsWorld bought a new display case for $12,000 and was given a trade-in of $2,000 on an old display case. The old case had an original cost of $7,000 and accumulated depreciation of $4,000 to the date of trade-in. SportsWorld should record the new display case at:

Voltarin Co purchased a machine for $625,000 on November 2, 2019. The company expects the machine to last for 10 years or 50,000 hours of operation, with an estimated residual value of $15,000. During 2019 the computer was operated for 3,000 hours, while in 2020 it was operated for 2,600 hours. Calculate the depreciation expense for the computer for 2019 and 2020 using the following depreciation methods: (a) Straight-line (b) Double-declining-balance (c) Units-of-production

Depreciation

Discuss accounting for intangible assets.

Intangible assets provide rights, privileges, and competitive advantages to the owner, are used in operations, and have no physical substance.

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

The Income Tax Act requires that companies use a declining-balance method for calculating the maximum capital cost allowance that may be claimed in any period

Amortization is the process of allocating the cost of intangibles over their estimated useful life.

To be charged to and reported as part of the cost of property, plant and equipment, an expenditure must be normal, reasonable, and necessary in preparing the asset for its intended use.

The appropriate way to amortize goodwill is

Factor(s) that might limit an intangible asset's useful life include

Inadequacy refers to the condition where the capacity of a property, plant and equipment item is too small to meet the company's productive demands.

Aye Company's computer was destroyed by fire. The computer originally cost $5,000, and accumulated depreciation to the date of the fire was $900. The company received $2,000 from an insurance policy that covered the computer and will use that money to help pay for a new computer. Prepare the general journal entry to record the loss of the computer and the receipt of cash from the insurance company.

SportsWorld purchased property for a building site. The costs associated with the property were: Purchase Price \ 175,000 Real Estate Commissions \ 15,000 Legal Fees \ 800 Expense of clearimg land \ 2,000 Expense to remove old building \ 1,000 What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?

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?

FNT Company purchased land and a building on January 1, 2023, at a cost of $950,000. The land was appraised at $150,000 and the building at $900,000. FNT renovated the building from January 1 to March 31, 2023, at a cost of $125,000. It also paid the local government an assessment of $55,000 to have a sidewalk and improved sewer system put into place. The new building opened on April 1, 2023, with a customer reception that cost JMT $7,000. FNT estimates the building will be used for 25 years and will use the straight-line method to depreciate the asset Required: Prepare all journal entries relating to the land, building, and related activities, for JMT's January 1 to December 31, 2023, fiscal year. Round the final answer to the nearest dollar.