Exam 10: Property, Plant, and Equipment; Goodwill; and Intangibles

Lumac Corporation purchased land and a building for $1,500,000. An appraisal indicates that the land's value is $650,000 and the building's value is $975,000. The amount that would be debited to the building account is:

Quick Airlines Ltd. financial data follow: Bookvalue of assets $\quad \$ 650,000$ Market value of assets $\quad 780,000$ Bookvalue of liabilities $\quad 120,000$ Slow Airlines Ltd. has agreed to purchase Quick Airlines Ltd. for $900,000 cash on January 1 of the current year. a)Determine the amount of goodwill, if any. b)Prepare the journal entry to record the purchase of Quick Airlines Ltd.

Provincial sales taxes (PST)paid on the purchase of property, plant, and equipment is included in the cost of the asset.

Little Construction Ltd. bought land, a building, and equipment for a lump-sum of $600,000. Following are the appraised fair market values of the newly acquired assets: Land \ 200,000 Building 300,000 Equipment 150,000 Determine the cost of each asset. Round to the nearest dollar if necessary. Land $\quad\quad ------$ Building $\quad\quad -----$ Equipment $\quad\quad -----$

The cost of removing an old building from acquired land would be a part of the land account.

Which of the following assets is never amortized?

Betterments must be expensed as capitalizing the transaction would affect the subsequent calculations of amortization.

Record journal entries for the following transactions involving property, plant and equipment for Blankenship Company Ltd.: a)Purchased equipment costing $100,000. b)Paid freight to have equipment delivered, $500. c)Paid $1,000 to have equipment installed. d)Paid $50,000 to have a similar piece of equipment overhauled. e)Paid $100 for periodic maintenance to the new equipment.

Durham Bike Shop Ltd.'s year end is December 31. Some of the company's transactions are as follows: March 1 Paid \ 190,000 cash to purchase the following assets: Asset Market Value Est. Useful Life Est. Residual Value Land \ 88,000 - - Building 132,000 25 years \ 14,000 Durham Bike Shop Ltd. plans to use the straight-line amortization method for the building. April 15 Purchased a used pickup truck for $10,500 cash. The truck sells for $15,900 when new. The truck is expected to be used for eight years and driven 120,000 km. The estimated salvage value is $3,900. It will be amortized using the units-of-production method. April 16 Installed heavy-duty racks costing $1,400 that will enable the truck to carry several bicycles. June 30 Paid John's garage for an oil change ($35)and the replacement of a muffler ($425). Dec. 31 Recorded amortization on the assets. The truck was driven 9,000 kilometres since it was purchased. Record the above transactions of Durham Bike Shop Ltd. Round all amounts to the nearest dollar. Explanations are not required.

Which of the following would not be included in the building account?

The cost of paving a parking lot should be charged to:

Amortization is a process of asset valuation.

The cost of land improvements includes fencing, paving, sprinkler systems, and lighting.

The cost of a trademark or trade name is amortized over its useful life or 60 years.

If a firm changes its estimate of the useful life of an asset, the firm must recalculate amortization expense for each previous year since the asset was placed in service.

Leasehold improvements are not subject to amortization.

The cost of improvements to leased assets appears on the business's balance sheet as leasehold improvements.

If a company constructs its own assets, the cost of the building may include the cost of interest on money borrowed to finance the construction.

A loss is recorded on the disposal of property, plant and equipment when:

Goodwill can only be recorded at the purchase of a business.