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

Alvarado Company purchased a new machine for $400000. It is estimated that the machine will have a $40000 salvage value at the end of its 5-year useful service life. The double-declining-balance method of depreciation will be used. Instructions Prepare a depreciation schedule which shows the annual depreciation expense on the machine for its 5-year life.

On May 1 2017 Pinkley Company sells office furniture for $300000 cash. The office furniture originally cost $750000 when purchased on January 1 2010. Depreciation is recorded by the straight-line method over 10 years with a salvage value of $75000. What gain should be recognized on the sale?

Hunt Company purchased factory equipment with an invoice price of $90000. Other costs incurred were freight costs $1100; installation wiring and foundation $2200; material and labor costs in testing equipment $700; oil lubricants and supplies to be used with equipment $500; fire insurance policy covering equipment $1400. The equipment is estimated to have a $5000 salvage value at the end of its 8-year useful service life. Instructions (a) Compute the acquisition cost of the equipment. Clearly identify each element of cost. (b) If the double-declining-balance method of depreciation was used the constant percentage applied to a declining book value would be __________.

All of the following are intangible assets except

Presented below is information related to plant assets natural resources and intangibles at year end on December 31 2017 for Hanley Company: Buildings \ 1,280,000 Goodwill 650,000 Patents 480,000 Coal Mine 440,000 Accumulated Depreciation-Bidg. 670,000 Accumulated Depletion 275,000 Instructions Prepare a partial balance sheet for Hanley Company that shows how the above listed items would be presented.

Presto Company purchased equipment and these costs were incurred: Cash price \ 65,000 Sales taxes 3,600 Insurance during transit 640 Installation and testing Total costs Presto will record the acquisition cost of the equipment as

Equipment with an invoice price of $20000 was purchased and freight costs were $900. The cost of the equipment would be $______________.

When purchasing delivery equipment sales taxes and motor vehicle licenses should be charged to Delivery Equipment.

Identify the item below where the terms are not related.

A machine with a cost of $480000 has an estimated salvage value of $30000 and an estimated useful life of 5 years or 15000 hours. It is to be depreciated using the units-of-activity method of depreciation. What is the amount of depreciation for the second full year during which the machine was used 5000 hours?

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

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

On January 1 2014 Grier Company purchased and installed a telephone system at a cost of $20000. The equipment was expected to last five years with a salvage value of $3000. On January 1 2015 more telephone equipment was purchased to tie-in with the current system for $10000. 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 2015 through the useful life of the new equipment. Year Telephone Expense Overstated (Understated) Depreciation Expense Overstated (Understated) Net Income Overstated (Understated) 2015 2016 2017 2018

On March 1 2017 Landon Company acquired real estate on which it planned to construct a small office building. The company paid $90000 in cash. An old warehouse on the property was razed at a cost of $7600; the salvaged materials were sold for $1700. Additional expenditures before construction began included $1100 attorney's fee for work concerning the land purchase $4000 real estate broker's fee $7800 architect's fee and $14000 to put in driveways and a parking lot. Instructions Determine the amount to be reported as the cost of the land.

Grayson's Lumber Mill sold two machines in 2018. The following information pertains to the two machines: Purchase Useful Salvage Depreciation Sales Machine Cost Date Life Value Method Date Sold Price \#1 \6 6,000 7/1/14 5 \ 6,000 Straight-line 7/1/18 \1 5,000 \#2 \ 50,000 7/1/17 5 \ 5,000 Double-declining- 12/31/18 \3 0,000 balance Instructions (a) Compute the depreciation on each machine to the date of disposal. (b) Prepare the journal entries in 2018 to record 2018 depreciation and the sale of each machine.

Under the double-declining-balance method the depreciation rate used each year remains constant.

In calculating depreciation both plant asset cost and useful life are based on estimates.

On May 1 2017 Pinkley Company sells office furniture for $300000 cash. The office furniture originally cost $750000 when purchased on January 1 2010. Depreciation is recorded by the straight-line method over 10 years with a salvage value of $75000. What depreciation expense should be recorded on this asset in 2017?

Salem Company hired Kirk Construction to construct an office building for £6400000 on land costing £1600000 which Salem Company owned. The building was complete and ready to be used on January 1 2017 and it has a useful life of 40 years. The price of the building included land improvements costing £480000 and personal property costing £600000. 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 2017?