Exam 8: Operating Assets: Property, Plant, and Equipment, and Intangibles

River Company wants to minimize the amount of time and effort its bookkeepers spend on calculating depreciation. Since River has not been profitable, taxes are not an issue, but maximizing the profit and minimizing reported losses are major concerns. Recommend a course of action for River. Support your recommendation.

For each of the following intangible assets, indicate the amount of amortization expense that should be recorded for the year 2014 and the amount of accumulated amortization on the balance sheet as of December 31, 2014.

Exeter Corporation purchased a piece of equipment with a price of $80,000 on March 1, 2015. The amounts below are related to the equipment purchase. Match the items below and explain why each revenue expenditure is not capitalized. -It was necessary for an architect to redesign the work space to accommodate the new equipment. A fee of $6,000 was paid.

Which of the following accounts would not be reported in the Property, Plant, and Equipment section of a balance sheet?

The Property, Plant, and Equipment category includes long-term investments.

A change in estimate of an asset's residual value involves restating the income statements of past periods for the estimate change.

depreciation is the GAAP depreciation method used most frequently.

If a company's asset turnover ratio decreased from 2014 to 2015, which of the following conclusions can be made?

The FASB standards do not have a specific rule that requires residual value and asset life to be reviewed annually for property, plant, and equipment.

Eagle's Nest sold equipment for $4,000 cash. This resulted in a $1,500 loss. What is the impact of this sale on the working capital?

The two items that must be estimated with respect to a plant asset in order to properly allocate cost to the affected accounting periods are ______________________________ and ______________________________.

Norwood, Inc. Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of 8 years, or 12,500 hours of operation. The crane was purchased on January 1, 2015 and was used 2,700 hours in 2015 and 2,600 hours in 2016. -Refer to the information about Norwood, Inc. If Norwood uses the units-of-production method, what is the depreciation rate per hour for the equipment?

How are research and development costs reported in the financial statements? Why is this treatment required?

Capitalizing interest increases the recorded cost of a plant asset.

Identify where each of the following accounts would be reported on Coca­Cola's financial statements -Amortization expense

Select where the following accounts would be reported on Coca­Cola's financial statements. Select all that apply. -Gain on sale of plant asset a. Balance Sheet - Property, Plant, and Equipment b. Balance Sheet - Intangible Assets c. Balance Sheet - Current Assets d. Balance Sheet - Other Assets e. Income Statement - Operating Section f. Income Statement - Other Revenue and Expense Section g. Statement of Cash Flows

Marrow Company has a large portion of its plant assets concentrated in an area where technology is changing rapidly. Marrow wants to minimize taxable income and maximize net income reported to stockholders. Recommend a course of action for Marrow. Support your recommendation.

Assets classified as property, plant, and equipment are reported at

Given below is a list of items that may be reported on a statement of cash flows. Identify each as one of the following using the indirect method: -Payment of research and development costs

Use the following Assets section of Hu Corporation's balance sheets for the years ended December 31, 2015 and 2014 to answer the questions that follow. HU CORPORATION Assets Section of Consolidated Balance Sheets in millions at December 31,2015 2014 ASSETS Current Assets $1,889 and $97 Hu Corporation recorded depreciation expense of $344 million for 2014. -Refer to the information for Hu Corporation. Required: 1 Determine the book value of Hu's property, plant and equipment at December 31, 2015 and 2014. 2 What types of transactions could have caused the change in book value of property, plant, and equipment during 2015?