Exam 9: Reporting and Analyzing Long-Lived Assets

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

National Molding 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?

Hopson Company incurred $600,000 of research and development costs in its laboratory to develop a new product. It spent $80,000 in legal fees for a patent granted on January 2, 2014. On July 31, 2014, Hopson paid $60,000 for legal fees in a successful defense of the patent. What is the total amount that should be debited to Patents through July 31, 2012?

A company sells a plant asset that originally cost $240,000 for $80,000 on December 31, 2014. The accumulated depreciation account had a balance of $120,000 after the current year's depreciation of $20,000 had been recorded. The company should recognize a

Morton's Courier Service recorded a loss of $6,000 when it sold a van that originally cost $56,000 for $10,000. Accumulated depreciation on the van must have been

Which of the following is not an intangible asset that is reported on the balance sheet?

Equipment with a cost of $225,000 has an estimated salvage value of $15,000 and an estimated life of 4 years or 10,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 2,700 hours?

As a recent graduate of State University you're aware that IFRS requires component depreciation for plant assets. A friend has asked you to succinctly explain what component depreciation means. Which of the following correctly describes component depreciation?

Foyle Company purchased a new van for floral deliveries on January 1, 2013. The van cost $48,000 with an estimated life of 5 years and $12,000 salvage value at the end of its useful life. The double-declining-balance method of depreciation will be used. What is the balance of the Accumulated Depreciation account at the end of 2014?

Recording depreciation each period is an application of the matching principle.

Depreciation is a process of

On January 1, a machine with a useful life of four years and a residual value of $12,000 was purchased for $60,000. What is the depreciation expense for year 2 under straight-line depreciation?

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

A company purchased land for $350,000 cash. Real estate brokers' commission was $25,000 and $35,000 was spent for demolishing an old building on the land before construction of a new building could start. Under the historical cost principle, the cost of land would be recorded at

A factory machine was purchased for $70,000 on January 1, 2014. It was estimated that it would have a $14,000 salvage value at the end of its 5-year useful life. It was also estimated that the machine would be run 40,000 hours in the 5 years. If the actual number of machine hours ran in 2014 was 4,000 hours and the company uses the units-of-activity method of depreciation, the amount of depreciation expense for 2014 would be

Which of the following is not true of ordinary repairs?

Wesley Hospital installs a new parking lot. The paving cost $45,000 and the lights to illuminate the new parking area cost $18,000. Which of the following statements is true with respect to these additions?

A plant asset originally cost $64,000 and was estimated to have a $4,000 salvage value at the end of its 5-year useful life. If at the end of three years, the asset was sold for $12,000, and had accumulated depreciation recorded of $36,000, the company should recognize a ______________ on disposal in the amount of $____________.

All of the following statements about the useful life factor associated with depreciation are true except

Jensen Company purchased a new machine on October 1, 2014, at a cost of $104,000. The company estimated that the machine has a salvage value of $8,000. The machine is expected to be used for 80,000 working hours during its 8-year life. Instructions Compute depreciation using the following methods in the year indicated. (a) Straight-line for 2014 and 2015, assuming a December 31 year-end. (b) Declining-balance using double the straight-line rate for 2014 and 2015. (c) Units-of-activity for 2014, assuming machine usage was 2,900 hours. (Round depreciation per unit to the nearest cent.)