Exam 8: Property, Plant, and Equipment

Bountiful Limited purchased equipment on January 1, 2009 for $275,000. It was estimated that the equipment would have a residual value of $25,000 at the end of its useful life. The asset's useful life was estimated at 5 years or 10,000 units of output. The company has a December 31 year end. Assuming the company uses straight-line depreciation, what is the net book value of the asset on December 31, 2012?

Francisco purchased a machine on Jan 1, 2010 for $600,000. The machine had an estimated useful life of 10 years and an estimated residual value of $10,000. The company uses straight-line depreciation and records monthly depreciation. The machine was sold on December 31, 2015 for $350,000. What was the gain/loss on disposal of the machine?

The following entry was recorded by Woodrow Inc.: What is the effect on Woodrow's financial statements?

What is the meaning of "exit value"?

Explain why earnings manipulation of property, plant and equipment can have long-lasting impact on the financial statements.

Explain the accounting purpose of "depreciation." Does depreciation represent the decline in value of an asset?

What is the meaning of "depreciable amount"?

Celtic Company bought three used machines located in Toronto for $20,000,000. The arrangement with the seller is to move all the equipment to Celtic's factory in Edmonton. It is understood that some of the equipment will be sold as scrap or disassembled and used as spare parts. A careful inventory of all the equipment is shown below. Celtic's plans are to maximize the value of each item by using it in its most beneficial manner. Required: Allocate the purchase price among the assets acquired.

Hotel-R-Us owns a machine that it purchased on Jan 1, 2010 for $600,000. The machine had an estimated useful life of 5 years and an estimated residual value of $100,000. The company uses the declining balance method with a rate of 20%. The machine was sold on December 31, 2012 for $140,000. What was the accumulated depreciation at December 31, 2012?

Ontario Ltd. purchased a machine on Jan 1, 2010 for $750,000. The machine had an estimated useful life of 5 years and an estimated residual value of $50,000. The company uses straight-line depreciation and records monthly depreciation. The machine was sold on December 31, 2013 for $200,000. What was the gain/loss on disposal of the machine?

Easter Corp. owns a machine that it purchased on Jan 1, 2010 for $600,000. The machine had an estimated useful life of 10 years and an estimated residual value of $100,000. The company uses the declining balance method with a rate of 20%. The machine was sold on December 31, 2012 for $140,000. What was the accumulated depreciation at December 31, 2011?

What is the IFRS treatment for replacements versus repairs?

Growth Industries incurred the following costs in fiscal 2011: Additional information: •Growth Industries estimates that future site restoration of $1 million will be required in 20 years at an interest rate of 8%. •While the equipment has a useful life of 10 years, the engine in the equipment will require replacement in 3 years. The engine has a fair value of $150,000. •The landscaping, parking lot and fences will need to be replaced every 4 years. •The useful life of the building and roof will be 20 years. The heating and air conditioning system will have a useful life of only 10 years. Required: a)Determine how much should be capitalized to property, plant and equipment. b)Provide the journal entries required to record all of these transactions. c)Provide all the adjusting journal entries required at year end for fiscal 2011. d)Assume that the building is painted in fiscal 2012 at a cost of $45,000. Prepare the required journal entry. e)Assume that the engine for the machine requires replacing after 2 years at a cost of 125,000. Prepare the required journal entries. Round all values to the nearest dollar, if necessary.

Welcome Corporation purchased equipment for $267,000. The equipment is estimated to have a useful life of 10 years and a residual value of $27,000. Welcome uses straight-line depreciation and has a December 31 year end. On January 1, 2012, the net book value of the equipment is $211,000. What is the date of purchase of the equipment?

Which factor will affect the estimated useful life of property, plant or equipment?

Seneca Valley owns a machine that it purchased on Jan 1, 2010 for $600,000. The machine had an estimated useful life of 10 years and an estimated residual value of $100,000. The company uses the double-declining balance method. The machine was sold on December 31, 2012 for $140,000. What is the depreciation rate for 2010?

Every three years a major component (part #45)in a machine must be replaced. By doing this regular but expensive repair the machine can be used for 15 years. If Part #45 were not replaced, the machine could be used only for a maximum of six years. When the machine was originally purchased for $5,000,000 it was set up as two components: the machine was depreciated over its estimated useful life of 15 years and Part #45 was recognized as a separate PPE asset and depreciated over three years. Recently this repair was completed at a cost of $700,000 for Part #45. The earlier Part #45 cost $550,000 when it was installed three years ago. Neither the old nor the new Part #45 has any residual value. Prepare the necessary journal entries to record the transaction. Provide a short justification for your chosen treatment.

A machine was purchased during 2013 for $3,750,000. At the time of purchase it was estimated that the machine would have a useful life of ten years and a residual value of $750,000. During 2019 the machine was sold for $1,850,000. The company uses straight-line depreciation, but does not record depreciation expense in the year of acquisition or disposal. Required: a. Prepare the journal entry to record the derecognition of the asset in 2019. b. Assume that rather than using the straight-line method, the company uses the declining balance method of depreciation at a 20% rate. Prepare the journal entry to record the derecognition of the asset in 2019.

Plastic Moulds purchased equipment on January 1, 2009 for $275,000. It was estimated that the equipment would have a residual value of $25,000 at the end of its useful life. The asset's useful life was estimated at 5 years or 10,000 units of output. The company has a December 31 year end. Additional information: Assuming the company uses the units-of-production depreciation method, what is the depreciation rate per unit for 2009?

What issue does not relate to the subsequent measurement of property, plant and equipment?