Exam 9: Reporting and Analyzing Long-Lived Assets

If the proceeds from the sale of a plant asset exceed its ______________, a gain on disposal will occur.

Additions and improvements to a plant asset that increase the asset's operating efficiency, productive capacity, or expected useful life are generally expensed in the period incurred.

Phill Co. has equipment that cost $50,000 and has been depreciated $30,000. Instructions Record entries for the disposal under the following assumptions. (a) It was scrapped as having no value. (b) It was sold for $23,000. (c) It was sold for $18,000.

A change in the estimated useful life of equipment requires

Compton Inc. made a $500 ordinary repair to a piece of equipment. Compton's accountant debited this amount to the asset account, Equipment and credited Cash. Was this the correct entry and if not, why not?

Presented below are selected transactions for the Tinker Company for 2015. Jan. 1 Retired a piece of equipment that was purchased on January 1, 2005. The equipment cost $75,000 on that date, and had a useful life of 10 years with no salvage value. April 30 Sold equipment for $38,000 that was purchased on January 1, 2012. The equipment cost $105,000, and had a useful life of 5 years with no salvage value. Dec. 31 Discarded equipment that was purchased on June 30, 2011. The equipment cost $42,000 and was depreciated on a 5-year useful life with a salvage value of $2,000. Instructions Journalize all entries required as a result of the above transactions. Tinker Company uses the straight-line method of depreciation and has recorded depreciation through December 31, 2014.

A plant asset acquired on October 1, 2014, at a cost of $800,000 has an estimated useful life of 10 years. The salvage value is estimated to be $50,000 at the end of the asset's useful life. Instructions Determine the depreciation expense for the first two years using the: (a) straight-line method. (b) double-declining-balance method.

On March 1, 2014, Geoffrey Company acquired real estate, on which it planned to construct a small office building, by paying $85,000 in cash. An old warehouse on the property was demolished at a cost of $8,200; the salvaged materials were sold for $2,200. Additional expenditures before construction began included $1,500 attorney's fee for work concerning the land purchase, $5,500 real estate broker's fee, $9,100 architect's fee, and $16,000 to put in driveways and a parking lot. Instructions (a) Determine the amount to be reported as the cost of the land. (b) For each cost not used in part (a), indicate the account to be debited.

Which of the following is included in the cost of constructing a building?

The depreciable cost of a plant asset is its original cost minus obsolescence.

Land improvements are generally charged to the Land account.

An asset was purchased for $100,000. It had an estimated salvage value of $25,000 and an estimated useful life of 10 years. After 5 years of use, the estimated salvage value is revised to $20,000 but the estimated useful life is unchanged. Assuming straight-line depreciation, depreciation expense in Year 6 would be

The following information is provided for Nguyen Company and Northwest Corporation. If Nguyen and Northwest are in the same industry and the industry average for the asset turnover ratio is equal to 1.20 times, which of the following statements is true?

A company has the following assets: Buildings and Equipment, less accumulated depreciation of \ 4,000,000 \ 18,000,000 Copyrights 1,500,000 Patents 3,000,000 Land 5,000,000 The total amount reported under Property, Plant, and Equipment would be

Goodwill is an unusual asset in that it cannot be sold individually apart from a business as a whole. If goodwill is an intangible asset, why can't it be sold like other intangible assets such as copyrights and patents? Briefly explain what makes goodwill different.

The cost of demolishing an old building on land that has been acquired so that a new building can be constructed should be charged to the ______________ account.

A truck costing $45,000 and on which $39,000 of accumulated depreciation has been re-corded was discarded as having no value. The entry to record this event would include a

Conley Company purchased equipment for $60,000 on January 1, 2012, and will use the double-declining-balance method of depreciation. It is estimated that the equipment will have a 5-year life and a $3,000 salvage value at the end of its useful life. The amount of depreciation expense recognized in the year 2014 will be

Management should select the depreciation method that

Stan's Lumber Mill sold two pieces of equipment in 2014. The following information pertains to the two pieces of equipment: Instructions (a) Compute the depreciation on each piece of equipment to the date of disposal. (b) Prepare the journal entries in 2014 to record 2014 depreciation and the sale of each piece of equipment.