Exam 10: Plant Assets, Natural Resources, and Intangibles

Impairment of an intangible asset occurs when the book value of an asset is less than the fair value.

A coal mine cost $1,000,000 and is estimated to hold 50,000 tons of coal. There is no residual value. 6,000 tons are extracted and sold during the first year of operations. Calculate depletion expense for the first year.

The units-of-production method is used to compute the depletion expense.

Which of the following is an intangible asset?

Black n White Company purchased equipment for $45,000. The company recorded total depreciation of $36,000 on the equipment. On January 1, 2015, Black n White traded in the equipment for new equipment, paying $54,000 cash. The fair market value of the new equipment is $65,000. Journalize the company's exchange of equipment. Assume the exchange had commercial substance.

The cost of land does not include the cost of fencing and paving the land.

The process by which businesses spread the allocation of an intangible asset's cost over its useful life is referred to as amortization.

Nobells Inc. has acquired a property that included both land and a building for $500,000. The company hired an appraiser who has determined that the market value of the land is $300,000 and that of the building is $400,000. At what amount should the company record the cost of building?

Prinkle Company had purchased equipment for $50,000 on January 1, 2015. On December 31, 2017, the company sold the equipment for $23,000. Accumulated Depreciation as of December 31, 2017 was $25,000. Calculate gain or loss on sale.

Server Solutions paid $200,000 to acquire Tabletz an electronic gadget-advertising website. At the time of the acquisition, Tabletz's balance sheet reported total assets of $200,000 and liabilities of $100,000. The fair market value of Tabletz's assets was $200,000. The fair market value of its liabilities was $100,000. Journalize the acquisition of Tabletz in the books of Server Solutions.

A company purchased a computer on July 1, 2015 for $50,000. Estimated useful life of the computer was 5 years and it has no residual value. Which of the following methods should be used to best match its expense against the revenue it produces?

Iverycoast Inc. purchased a van on January 1, 2015, for $800,000. Estimated life of the van was 5 years, and its estimated residual value was $90,000. Iverycoast uses the straight-line method of depreciation. Give journal entry to record depreciation expense for 2015 on the van.

The process of allocating the cost of a plant asset over its useful life is known as cost reduction.

On January 1, 2015, Zade Manufacturing Company purchased a machine for $40,000,000. The company expects to use the machine for 24,000 hours over the next 6 years. The estimated sale value of the machine at the end of the sixth year is $40,000. The schedule of usage of the machine is as below. Prepare the depreciation schedule using the units-of-production method of depreciation.

Steel Rolling Company purchased a mine on January 1, 2015, for $500,000 and it is estimated to contain 30,000 tons of iron ore. There is no residual value. The company has extracted 2,500 tons of ore in 2015 and 3,800 tons of ore in 2016. What is depletion expense for 2016? (Do not round your intermediate calculations).

Steel Rolling Company purchased a mine on January 1, 2015, for $500,000 and they estimated that 30,000 tons of iron ore can be extracted from it. It has no residual value. The company has extracted 2,500 tons of ore in 2015. Give the journal entry to record depletion expense for the year 2015. (Do not round your intermediate calculations).

Steel Rolling Company purchased a mine on Jan 1, 2015 for $500,000 and it is estimated to contain 30,000 tons of iron ore. There is no residual value. The company has extracted 2,500 tons of ore in 2015 and 3,800 tons of ore in 2016. What is the book value of the mine at the end of 2016? (Do not round your intermediate calculations).

Which of the following is true when the estimate of an asset's useful life is changed?

Use of MACRS is acceptable for financial reporting under GAAP.

Nobells Inc. has acquired a property that included both land and a building for $500,000. The company paid cash. The company hired an appraiser who has determined that the market value of the land is $300,000 and that of the building is $400,000. Journalize the lump-sum purchase.