Exam 9: Property, Plant and Equipment and Intangibles

The formula for calculating straight-line depreciation is:

Additional subsequent expenditures that result in future economic benefits and can be reliably measured should be treated as an):

A main accounting issue for property, plant and equipment is:

Factors) that might limit an intangible asset's useful life include:

The cost of developing, maintaining, or enhancing the value of a trademark is capitalized, or added to the value of the asset when incurred.

Any expenditures for legal fees, surveying, and accrued property taxes should not be included in the cost of land.

Land improvements are:

A copyright gives its owner the exclusive right to publish and sell a musical, literary, or artistic work during the life of the creator plus 20 years.

Machinery after two years worth of depreciation has an opening book value of $6,400. At the beginning of the third year, the predicted number of years remaining in its useful life changes from three years to four years and its estimated residual value changes from the original $1,000 to $400. The revised annual depreciation using the straight-linemethod is $1,500.

If a machine is damaged during unpacking, the repairs are added to its cost.

A patent is an exclusive right granted to its owner to manufacture and sell a patented machine or device, or to use a process, for a specified period of time.

SportsWorld bought a new display case for $12,000 and was given a trade-in of $2,000 on an old display case. The old case had an original cost of $7,000 and accumulateddepreciation of $4,000 to the date of trade-in. SportsWorld should record the new display case at:

To be charged to and reported as part of the cost of property, plant and equipment, an expenditure must be normal, reasonable, and necessary in preparing the asset for itsintended use.

A machine originally had an estimated service life of 5 years, and after 3 years, it was decided that the original estimate should have been for 10 years. The remaining cost to be depreciated should be allocated over the next:

Machinery having a four-year useful life and a residual value of $5,000 was acquired for $65,000 cash on June 28. Using the nearest whole month method, the companywould recognize $11,250 for depreciation expense at the end of the first year, December 31.

The units of production method of depreciation charges a varying amount of expense for each period of an asset's useful life depending on its usage.

A depreciation method in which a property, plant and equipment asset's depreciation expense for the period is determined by applying a constant depreciation rate each year to the asset's beginning book value is called:

Companies are required to use the straight line depreciation method for tax purposes because this method yields the lowest depreciation expense and results in the highest payment of tax.

SportsWorld purchased a machine for $190,000. The machine has a useful life of 8 years and a residual value of $10,000. SportsWorld estimates that the machine couldproduce 750,000 units of product over its useful life. In the first year, 95,000 units were produced. In the second year, production increased to 111,000 units. Using theunits-of-production method, what is the amount of depreciation that should be recorded for the second year?

The useful life of a property, plant and equipment asset is: