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

When an asset is purchased during the year, it is not necessary to record depreciation expense in the first year under the declining-balance depreciation method.

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

A characteristic of capital expenditures is that the expenditures occur frequently during the period of ownership.

A company decides to exchange its old machine and $77,000 cash for a new machine. The old machine has a book value of $63,000 and a fair market value of $70,000 on the date of the exchange. The cost of the new machine would be recorded at

Once an asset is fully depreciated, no additional depreciation can be taken even though the asset is still being used by the business.

Useful life is expressed in terms of use expected from the asset under the

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

Nicholson Company purchased equipment on January 1, 2008, for $20,000 with an estimated salvage value of $5,000 and estimated useful life of 8 years. On January 1, 2010, Nicholson decided the equipment will last 12 years from the date of purchase. The salvage value is still estimated at $5,000. Using the straight-line method the new annual depreciation will be:

A plant asset acquired on October 1, 2010, at a cost of $300,000 has an estimated useful life of 10 years. The salvage value is estimated to be $30,000 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.

A loss on disposal of a plant asset as a result of a sale or a retirement is calculated in the same way.

Koch Company owns equipment that cost $100,000 when purchased on January 1, 2007. It has been depreciated using the straight-line method based on estimated salvage value of $10,000 and an estimated useful life of 5 years. Instructions Prepare Koch Company's journal entries to record the sale of the equipment in these four independent situations. (a) Sold for $56,000 on January 1, 2010. (b) Sold for $56,000 on May 1, 2010. (c) Sold for $22,000 on January 1, 2010. (d) Sold for $22,000 on October 1, 2010.

The declining-balance method of depreciation is called an accelerated depreciation method because it depreciates an asset in a shorter period of time than the asset's useful life.

If a company incurs legal costs in successfully defending its patent, these costs are recorded by debiting

The balance in the Accumulated Depreciation account represents the

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

During 2010, Rathke Corporation reported net sales of $2,000,000, net income of $1,200,000, and depreciation expense of $100,000. Rathke also reported beginning total assets of $1,000,000, ending total assets of $1,500,000, plant assets of $800,000, and accumulated depreciation of $500,000. Rathke's asset turnover ratio is

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

Losses on an exchange of plant assets that has commercial substance are

On May 1, 2010, Pinkley Company sells office furniture for $90,000 cash. The office furniture originally cost $225,000 when purchased on January 1, 2003. Depreciation is recorded by the straight-line method over 10 years with a salvage value of $22,500. What depreciation expense should be recorded on this asset in 2010?

Carey Company buys land for $50,000 on 12/31/09. As of 3/31/10, the land has appreciated in value to $50,700. On 12/31/10, the land has an appraised value of $51,800. By what amount should the Land account be increased in 2010?