Exam 9: Property, Plant and Equipment Intangibles

ACS Company made the following expenditures in connection with the construction of its new cross fit facility: Architect's fees 9,000 Cash paid for land and old building 140,000 Removal of old building 20,000 Survey to site the new building (8,000) Legal fees for title search 1,000 Excavation for construction of basement 2,500 Machinery purchased 72,000 Storage charges on machirery because building was not ready when machirery was delivered 600 Freight on machinery purchased 2,000 Hauling charges to deliver machinery from storage to new building 800 Construction costs of new building 615,000 Landscaping 7,050 Installation of machinery 9,000 Prepare a schedule showing the amounts to be recorded as Land, Building, and Machinery and Equipment and Expenses.

Game Company's computer was destroyed by fire. The computer originally cost $6,000, and accumulated depreciation to the date of the fire was $1,900. 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.

When assigning values to an exchange of assets you should use the fair value of the asset given up.

Non-current assets can be divided into two groups including tangible and intangible assets. These assets are generally used in operations of a business and have useful lives extending over more than one accounting period.

The relevant factor(s) in calculating depreciation is(are)

During 2019, Storey Company acquired a new computer with a cash price of $12,800 by exchanging an old one on which Storey received a $1,500 trade-in. The old computer had cost $9,000 and its accumulated depreciation to the date of exchange was $5,500. This transaction has commercial substance. Prepare the journal entry to record the exchange.

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.

The most frequently used method of depreciation is the straight-line method.

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?

Creek Construction owned a bulldozer which was destroyed by fire. The bulldozer originally cost $38,000. The accumulated depreciation recorded to the date of loss was $20,000. The proceeds from the insurance company were $20,000. Creek Construction should recognize

The impairment of goodwill appears directly on the statement of changes in equity and not on the income statement.

When the cost of the asset changes because of a subsequent capital expenditure, revised depreciation for current and future periods must be calculated and adjusted.

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.

Machinery having a four-year useful life and a residual value of $5,000 was acquired for $65,000 cash on June 28. Using the nearest whole month method, the company would recognize $11,250 for depreciation expense at the end of the first year, December 31.

Depreciation amounts can be revised because of changes in the estimates for residual value, useful life or because of subsequent revenue expenditures.

The first step in accounting for the disposal of property, plant and equipment is calculating the gain or loss on disposal.

Twilight Manufacturing's property, plant and equipment records reveal the following information: Equipment Cost Residual Value Purchase Date Depreciation Method Estimated Useful Life Units Produced in 2014 (1) 60,000 12,000 December 1,2019 Straight Line 5 years 2,000 (2) 70,000 8,000 October 18, 2020 Units of Production 50,000 units 5,000 (3) 130,000 - June 12, 2020 Double Declining Balance 10 years 6,000 (4) 100,000 10,000 May 3, 2020 Straight Line 8 Years 8,000 Calculate the depreciation expense for each equipment item for the year ended December 31, 2020, using the nearest whole month method.

On January 1, 2020, Swooper Corp acquired and placed in service a plane at a cost of $10,000,000. The plane's service life and residual value were estimated at 5 years and $1,500,000, respectively. Assume the company earns $3,200,000 each year before depreciation and taxes. Calculate depreciation for 2020-2024, assuming the following alternative depreciation methods are used. (a) The straight-line method of depreciation. (b) The units-of-production method of depreciation.

Property, plant and equipment are

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.