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

Salem Company hired Kirk Construction to construct an office building for £6,400,000 on land costing £1,600,000, which Salem Company owned. The building was complete and ready to be used on January 1, 2015 and it has a useful life of 40 years. The price of the building included land improvements costing £480,000 and personal property costing £600,000. The useful lives of the land improvements and the personal property are 10 years and 5 years, respectively. Salem Company uses component depreciation, and the company uses straight-line depreciation for other similar assets. What total amount of depreciation expense would Salem Company report on its income statement for the year ended December 31, 2015?

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Mott Company uses the units-of-activity method in computing depreciation. A new plant asset is purchased for $48,000 that will produce an estimated 100,000 units over its useful life. Estimated salvage value at the end of its useful life is $4,000. What is the depreciation cost per unit?

Which of the following statements is not true when a fully depreciated plant asset is retired?

As a recent graduate of State University you're aware that IFRS requires component depreciation for plant assets. A friend has asked you to succinctly explain what component depreciation means. Which of the following correctly describes component depreciation?

Depletion expense is reported in the income statement as an operating expense.

Depreciation is the process of allocating the cost of a plant asset over its service life in

A change in the estimated useful life of equipment requires

If disposal of a plant asset occurs during the year, depreciation is

In computing depletion, salvage value is

If a plant asset is retired before it is fully depreciated and no salvage value is received,

All of the following factors in computing depreciation are estimates except

A loss on disposal of a plant asset is reported in the financial statements

The cost of land includes all of the following except

The depreciation method that applies a constant percentage to depreciable cost in calculating depreciation is

Nicklaus Company has decided to sell one of its old machines on June 30, 2015. The machine was purchased for $200,000 on January 1, 2011, 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?

Goodwill can be recorded

Mehring Company reported net sales of $540,000, net income of $72,000, beginning total assets of $240,000, and ending total assets of $360,000. What was the company's asset turnover?

Presto Company purchased equipment and these costs were incurred: Presto will record the acquisition cost of the equipment as

Mattox Company is building a new plant that will take three years to construct. The construction will be financed in part by funds borrowed during the construction period. There are significant architect fees, excavation fees, and building permit fees. Which of the following statements is true?