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

Which of the following assets does not decline in service potential over the course of its useful life?

A change in the estimated useful life of equipment requires

Grimwood Trucking purchased a tractor trailer for $171500. Interline uses the units-of-activity method for depreciating its trucks and expects to drive the truck 1000000 miles over its 12-year useful life. Salvage value is estimated to be $24500. If the truck is driven 90000 miles in its first year how much depreciation expense should Grimwood record?

Equipment was acquired on January 1 2014 at a cost of $90000. The equipment was originally estimated to have a salvage value of $5000 and an estimated life of 10 years. Depreciation has been recorded through December 31 2017 using the straight-line method. On January 1 2018 the estimated salvage value was revised to $6000 and the useful life was revised to a total of 8 years. Instructions Determine the depreciation expense for 2018.

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

A plant asset was purchased on January 1 for $100000 with an estimated salvage value of $20000 at the end of its useful life. The current year's Depreciation Expense is $10000 calculated on the straight-line basis and the balance of the Accumulated Depreciation account at the end of the year is $50000. The remaining useful life of the plant asset is

The Hartley Clinic purchased a new surgical laser for $90000. The estimated salvage value is $5000. The laser has a useful life of five years and the clinic expects to use it 10000 hours. It was used 1600 hours in year 1; 2200 hours in year 2; 2400 hours in year 3; 1800 hours in year 4; 2000 hours in year 5. Instructions (a) Compute the annual depreciation for each of the five years under each of the following methods: (1) straight-line. (2) units-of-activity. (b) If you were the administrator of the clinic which method would you deem as most appropriate? Justify your answer. (c) Which method would result in the lowest reported income in the first year? Which method would result in the lowest total reported income over the five-year period?

When plant assets are exchanged the cost of the new asset is the book value of the old asset plus any cash paid.

A company purchased factory equipment for $700000. It is estimated that the equipment will have a $70000 salvage value at the end of its estimated 5-year useful life. If the company uses the double-declining-balance method of depreciation the amount of annual depreciation recorded for the second year after purchase would be

On a balance sheet natural resources may be described more specifically as all of the following except

Mather Company purchased equipment on January 1 2016 at a total invoice cost of $336000; additional costs of $6000 for freight and $30000 for installation were incurred. The equipment has an estimated salvage value of $12000 and an estimated useful life of five years. The amount of accumulated depreciation at December 31 2017 if the straight-line method of depreciation is used is:

Hayden Company purchased a machine on January 1 2017 at a cost of $90000. It is expected to have an estimated salvage value of $5000 at the end of its 5-year life. The company capitalized the machine and depreciated it in 2017 using the double-declining-balance method of depreciation. The company has a policy of using the straight-line method to depreciate equipment but the company accountant neglected to follow company policy when he used the double-declining-balance method. Net income for the year ended December 31 2017 was $55000 as the result of depreciating the machine incorrectly. Instructions Using the method of depreciation which the company normally follows prepare the correcting entry and determine the corrected net income. (Show computations.)

Additions and improvements are costs incurred to increase the operating efficiency productive capacity or expected useful life and are referred to as __________________.

Depletion is computed by multiplying the depletion cost per unit by the

Henson Company incurred $600000 of research and development costs in its laboratory to develop a new product. It spent $90000 in legal fees for a patent granted on January 2 2017. On July 31 2017 Henson paid $60000 for legal fees in a successful defense of the patent. What is the total amount that should be debited to Patents through July 31 2017?

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?

Management should select the depreciation method that

Ron's Quik Shop bought machinery for $75000 on January 1 2016. 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 2017 Ron decides that the business will use the machinery for a total of 6 years. What is the revised depreciation expense for 2017?

A truck that cost $72000 and on which $60000 of accumulated depreciation has been recorded was disposed of for $18000 cash. The entry to record this event would include a

All of the following intangible assets are amortized except