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

Nicklaus Company has decided to sell one of its old machines on June 30, 2018. The machine was purchased for $200,000 on January 1, 2014, and was depreciated on a straight-line basis for 10 years with no salvage value. If the machine was sold for $65,000, what was the amount of the gain or loss recorded at the time of the sale?

A gain on sale of a plant asset occurs when the proceeds of the sale are greater than the

In general, how does one determine whether or not an expenditure should be included in the acquisition cost of property, plant, and equipment?

A plant asset cost $288,000 and is estimated to have a $36,000 salvage value at the end of its 8-year useful life. The annual depreciation expense recorded for the third year using the double-declining-balance method would be

On May 1, 2018, Pinkley Company sells office furniture for $300,000 cash. The office furniture originally cost $750,000 when purchased on January 1, 2011. Depreciation is recorded by the straight-line method over 10 years with a salvage value of $75,000. What depreciation expense should be recorded on this asset in 2018?

For each of the following unrelated transactions, (a) determine the amount of the amortization or depletion expense for the current year, and (b) present the adjusting entries required to record each expense at year end. (1) Timber rights were purchased on a tract of land for $480,000. The timber is estimated at 1,200,000 board feet. During the current year, 75,000 board feet of timber were cut and sold. (2) Costs of $8,000 were incurred on January 1 to obtain a patent. Shortly thereafter, $22,000 was spent in legal costs to successfully defend the patent against competitors. The patent has an estimated legal life of 12 years.

When constructing a building, a company is permitted to include the acquisition cost and certain interest costs incurred in financing the project.

Compute the asset turnover based on the following:

When purchasing land, the costs for clearing, draining, filling, and grading should be charged to a Land Improvements account.

Accumulated Depletion

The book value of a plant asset is always equal to its fair market value.

The cost of land includes all of the following except

The declining-balance method of computing depreciation is known as an _____________ depreciation method.

Recording depreciation each period is necessary in accordance with the

If an acquired franchise or license has an indefinite life, the cost of the asset is not amortized.

Mather Company purchased equipment on January 1, 2018 at a total invoice cost of $336,000; additional costs of $6,000 for freight and $30,000 for installation were incurred. The equipment has an estimated salvage value of $12,000 and an estimated useful life of five years. The amount of accumulated depreciation at December 31, 2019 if the straight-line method of depreciation is used is:

A company purchases a remote site building for computer operations. The building will be suitable for operations after some expenditures. The wiring must be replaced to computer specifications. The roof is leaky and must be replaced. All rooms must be repainted and recarpeted and there will also be some plumbing work done. Which of the following statements is true?

The cost of demolishing an old building on land that has been acquired so that a new building can be constructed should be charged to the ______________ account.

Using the units-of-activity method of depreciating factory equipment will generally result in more depreciation expense being recorded over the life of the asset than if the straight-line method had been used.