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

On January 1, 2016 Grier Company purchased and installed a telephone system at a cost of $20,000. The equipment was expected to last five years with a salvage value of $3,000. On January 1, 2017 more telephone equipment was purchased to tie-in with the current system for $10,000. The new equipment is expected to have a useful life of four years. Through an error, the new equipment was debited to Telephone Expense. Grier Company uses the straight-line method of depreciation. Instructions Prepare a schedule showing the effects of the error on Telephone Expense, Depreciation Expense, and Net Income for each year and in total beginning in 2017 through the useful life of the new equipment.

In computing depreciation, salvage value is

Ermler Company purchased a machine at a cost of $80,000. The machine is expected to have a $5,000 salvage value at the end of its 5-year useful life. Instructions Compute annual depreciation for the first and second years using the (a) straight-line method. (b) double-declining-balance method.

A plant asset acquired on October 1, 2018, at a cost of $400,000 has an estimated useful life of 10 years. The salvage value is estimated to be $40,000 at the end of the asset's useful life. Instructions Determine the depreciation expense for the first two years using: (a) the straight-line method. (b) the double-declining-balance method.

Conceptually, the cost allocation procedures for natural resources parallels that of plant assets.

A loss on disposal of a plant asset can only occur if the cash proceeds received from the asset sale are less than the asset's book value.

Eckman Company purchased equipment for $120,000 on January 1, 2017, and will use the double-declining-balance method of depreciation. It is estimated that the equipment will have a 5-year life and a $6,000 salvage value at the end of its useful life. The amount of depreciation expense recognized in the year 2019 will be

Presented below are selected transactions for Werley Company for 2018. Jan. 1 Received $9,000 scrap value on retirement of machinery that was purchased on January 1, 2008. The machine cost $90,000 on that date, and had a useful life of 10 years with no salvage value. April 30 Sold equipment for $34,000 that was purchased on January 1, 2015. The equipment cost $90,000, and had a useful life of 5 years with no salvage value. Dec. 31 Discarded a business automobile that was purchased on April 1, 2014. The car cost $27,000 and was depreciated on a 5-year useful life with a salvage value of $2,000. Instructions Journalize all entries required as a result of the above transactions. Werley Company uses the straight-line method of depreciation and has recorded depreciation through December 31, 2017.

To qualify as natural resources in the accounting sense, assets must be

Drago Company purchased equipment on January 1, 2018, at a total invoice cost of $1,200,000. The equipment has an estimated salvage value of $30,000 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at December 31, 2019, if the straight-line method of depreciation is used?

Land improvements should be depreciated over the useful life of the

The allocation of the cost of an asset to expense over its useful life is called _________________ for tangible plant assets, ________________ for natural resources, and _________________ for intangible assets.

Ron's Quik Shop bought machinery for $75,000 on January 1, 2017. Ron estimated the useful life to be 5 years with no salvage value, and the straight-line method of depreciation will be used. On January 1, 2018, Ron decides that the business will use the machinery for a total of 6 years. What is the revised depreciation expense for 2018?

Carey Enterprises sold equipment on January 1, 2018 for $10,000. The equipment had cost $48,000. The balance in Accumulated Depreciation at January 1 is $40,000. What entry would Carey make to record the sale of the equipment?

The ___________________ is calculated by dividing net sales by average total assets.

Goodwill

Additions and improvements to a plant asset that increase the asset's operating efficiency, productive capacity, or expected useful life are generally expensed in the period incurred.

In recording the acquisition cost of an entire business,

Equipment was purchased for $85,000 on January 1, 2018. Freight charges amounted to $3,500 and there was a cost of $10,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $15,000 salvage value at the end of its 5-year useful life. What is the amount of accumulated depreciation at December 31, 2019, if the straight-line method of depreciation is used?

The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method which