Exam 10: Plant Assets, Natural Resources, and Intangibles

On January 1, 2015, Anodel Inc. acquired a machine for $1,000,000. The estimated useful life of the asset is 5 years. Residual value at the end of 5 years is estimated to be $50,000. Calculate the depreciation expense per year using the straight-line method.

A coal mine costs $1,000,000 and is estimated to hold 50,000 tons of coal. There is no residual value. 3,000 tons are extracted and sold during the first year of operations. Calculate depletion per unit.

A photocopy machine costs $95,000 when new and has accumulated depreciation of $88,000. Suppose the company junks this machine and receives nothing. What is the result of the disposal transaction?

A company's accountant capitalized a payment that should be recorded as a revenue expenditure. How will this error affect the financial statements of the company?

The double-declining-balance method is an accelerated method of depreciation.

Baker Inc. had reported the following details for the year ended December 31, 2012: The company's beginning total assets and liabilities were $14,000,000 and $8,000,000, respectively. Calculate the asset turnover ratio for 2012.

Plant assets are long-lived, tangible assets used in the operation of a business.

A machine that was purchased for $100,000 has an accumulated depreciation of $70,000 as of the current date. The company exchanges the machine for a new machine. The new machine has a market value of $120,000 and company pays cash of $100,000. Assume the exchange has commercial substance. What is the result of this exchange?

An asset is said to be obsolete when a newer asset can perform the job more efficiently.

On January 1, 2015, a company acquired a truck for $600,000. The residual value was estimated to be $20,000. The truck can be driven for 50,000 miles over the next 3 years. Actual usage of the truck was 8,640 mile for the first year. Calculate the rate of depreciation to be applied, and depreciation for the first year using the units-of-production method. (Do not round your intermediate calculations).

A truck costs $300,000, and is expected to run 100,000 miles during its 5-year life. Residual value is expected to be zero because the truck was used when acquired. If the truck runs 24,000 miles the first year, how much depreciation should the company record under the units-of-production method?

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. At the beginning of 2017, the company revised the total estimated life of the asset from 5 years to 6 years. The estimated residual value remained the same as estimated earlier. Calculate the depreciation expense for the year 2017.

Cost of an asset is $10,000,000 and its residual value is $100,000. Estimated useful life of the asset is four years. Prepare the schedule of depreciation using the double-declining-balance method of accounting

When a company uses the straight-line method of depreciation, the amount of depreciation charged to expense will be reduced from year to year.

Rightz Petroleum Products owns furniture that was purchased for $20,000. Accumulated depreciation is $16,000. The furniture was sold for $3,800. Give journal entry to record the transaction.

Nobells Corp. has acquired land and paid an amount of $500 as brokerage to acquire the land. However, the company's accountant has recorded the $500 as a revenue expenditure. What is the effect of this error?

An expenditure which increases the capacity or efficiency of a plant asset or which extends the asset's life is known as a revenue expenditure.

Maple Company had net sales of $200,550 for the year ended December 31, 2015. Its beginning and ending total assets were $75,200 and $110,500, respectively. Determine Maple's asset turnover ratio for the year ended December 31, 2015.

Which of the following items should be amortized?

During the year 2015, Sanchez Corp. sold goods and earned revenue of $16,000,000. The company's beginning total assets was $8,000,000. Its assets turnover ratio was 1.6 times. Calculate the ending total assets of Sanchez.