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

Dapper Company Ltd. receives a patent on January 1, which cost $60,000 and has a remaining legal life of 15 years and an expected useful life of nine years. What is the amount of amortization expense for the current year?

Research and development costs are treated as expenses even when they benefit the business for more than one accounting period.

Double-declining-balance amortization computes annual amortization by multiplying the asset's book value by two times the straight-line rate.

The cost of a property, plant, and equipment asset includes the purchase price, provincial sales taxes, purchase commissions, and all other amounts paid to acquire the asset and to make it ready for its intended use.

Cycle Company Ltd. made a lump-sum purchase of land, buildings, and equipment for $630,000. The appraised market values for the items are respectively, $210,000, $322,000, and $168,000. Cycle Company Ltd. should debit the equipment account for:

Double-declining-balance amortization computes annual amortization by multiplying the asset's book value less residual value by two times the straight-line rate.

Research costs incurred by a company should be:

Transportation charges and insurance while in transit are part of the cost of equipment and therefore debited to the equipment account.

An amortizable asset's carrying value is the assets cost less accumulated amortization.

On January 1, 2019, Bithe Smarney & Co. purchased $35,500 worth of office equipment with an estimated useful life of seven years and an estimated residual value of $4,000. Bithe Smarney uses the straight-line method of amortization for all office equipment. At the beginning of 2022, Bithe Smarney revised its estimate of the useful life of the office equipment to a total of nine years. The 2022 amortization expense is:

All of the following are characteristics of property, plant and equipment except:

Global Enterprises Inc. sold some fully amortized equipment for $2,700 cash. The equipment had been purchased for $26,500 and Global had an estimated useful life at eight years and residual value at $3,500. The journal entry to record the sale of the equipment is:

Book value is defined as:

Which of the following statements regarding the relationship between amortization and income taxes is true?

Five hundred hectares of land are purchased for $120,000. Additional costs include $5,000 real estate commission, $10,000 for removal of an old building, $6,000 for paving, and $800 delinquent property taxes. What is the cost of the land?

Which of the following is false?

The cost of fencing should be charged to:

A company's accountant capitalizes a payment that should be recorded as an expense. Which of the following is true?

One way of safeguarding property, plant, and equipment assets is to carry adequate casualty insurance.

Intangible assets always have residual values.