Exam 10: Plant Assets, Natural Resources, and Intangible Assets

An asset was purchased for $250000. It had an estimated salvage value of $50000 and an estimated useful life of 10 years. After 5 years of use the estimated salvage value is revised to $40000 but the estimated useful life is unchanged. Assuming straight-line depreciation depreciation expense in year 6 would be

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

South Airlines purchased a 747 aircraft on January 1 2015 at a cost of $35000000. The estimated useful life of the aircraft is 20 years with an estimated salvage value of $5000000. On January 1 2018 the airline revises the total estimated useful life to 15 years with a revised salvage value of $3500000. Instructions (a) Compute the depreciation and book value at December 31 2017 using the straight-line method and the double-declining-balance method. (b) Assuming the straight-line method is used compute the depreciation expense for the year ended December 31 2018.

Iverson Company purchased a delivery truck for $45000 on January 1 2016. The truck was assigned an estimated useful life of 100000 miles and has a residual value of $10000. The truck was driven 18000 miles in 2016 and 22000 miles in 2017. Compute depreciation expense using the units-of-activity method for the years 2016 and 2017.

Able Towing Company purchased a tow truck for $180000 on January 1 2016. It was originally depreciated on a straight-line basis over 10 years with an assumed salvage value of $36000. On December 31 2018 before adjusting entries had been made the company decided to change the remaining estimated life to 4 years (including 2018) and the salvage value to $5000. What was the depreciation expense for 2018?

A company has the following assets: Buildings and Equipment, less accumulated depreciation of \ 2,000,000 \ 9,600,000 Copyrights 960,000 Patents 4,000,000 Timberlands, less accumulated depletion of \ 2,800,000 4,800,000 The total amount reported under Property Plant and Equipment would be

When estimating the useful life of an asset accountants do not consider

Natural resources are long-lived productive assets that are extracted in operations and are replaceable only by an act of nature.

Which one of the following items is not a consideration when recording periodic depreciation expense on plant assets?

Presented below are selected transactions for Werley Company for 2017. Jan. 1 Received $9000 scrap value on retirement of machinery that was purchased on January 1 2007. The machine cost $90000 on that date and had a useful life of 10 years with no salvage value. April 30 Sold equipment for $34000 that was purchased on January 1 2014. The equipment cost $90000 and had a useful life of 5 years with no salvage value. Dec. 31 Discarded a business automobile that was purchased on April 1 2013. The car cost $27000 and was depreciated on a 5-year useful life with a salvage value of $2000. 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 2016.

Santayana Company purchased a machine on January 1 2015 for $60000 with an estimated salvage value of $15000 and an estimated useful life of 8 years. On January 1 2017 Santayana decides the machine will last 12 years from the date of purchase. The salvage value is still estimated at $15000. Using the straight-line method the new annual depreciation will be

A company purchased a patent on January 1 2017 for $2500000. The patent's legal life is 20 years but the company estimates that the patent's useful life will only be 5 years from the date of acquisition. On June 30 2017 the company paid legal costs of $135000 in successfully defending the patent in an infringement suit. Prepare the journal entry to amortize the patent at year end on December 31 2017. (b) Trent Company purchased a franchise from Tastee Food Company for $400000 on January 1 2017. The franchise is for an indefinite time period and gives Trent Company the exclusive rights to sell Tastee Wings in a particular territory. Prepare the journal entry to record the acquisition of the franchise and any necessary adjusting entry at year end on December 31 2017. (c) Kline Company incurred research and development costs of $500000 in 2017 in developing a new product. Prepare the necessary journal entries during 2017 to record these events and any adjustments at year end on December 31 2017.

Companies record a gain or loss on the exchange of plant assets because most exchanges have commercial substance.

Sargent Corporation bought equipment on January 1 2017. The equipment cost $360000 and had an expected salvage value of $60000. The life of the equipment was estimated to be 6 years. Assuming straight-line deprecation the book value of the equipment at the beginning of the third year would be

Ordinary repairs are expenditures to maintain the operating efficiency of a plant asset and are referred to as

Tomko Company purchased machinery with a list price of $96000. They were given a 10% discount by the manufacturer. They paid $600 for shipping and sales tax of $4500. Tomko estimates that the machinery will have a useful life of 10 years and a residual value of $30000. If Tomko uses straight-line depreciation annual depreciation will be

The cost of a patent should be amortized over its legal life or useful life whichever is shorter.

Rooney Company incurred $560000 of research and development cost in its laboratory to develop a patent granted on January 1 2017. On July 31 2017 Rooney paid $84000 for legal fees in a successful defense of the patent. The total amount debited to Patents through July 31 2017 should be:

Indicate in the blank spaces below the section of the balance sheet where the following items are reported. Use the following code to identify your answer: