Exam 10: Plant Assets Natural Resoures and Intangibles

Record the following events and transactions for Leonard Company for the current year. 1. On January 2, Leonard purchased a patent for $35,000 with a remaining useful life of 10 years. Prepare the journal entry to amortize the patent at the end of the first year. 2. On January 3, Leonard made an advance payment on a leasehold of $840,000. The leasehold expires in 15 years. Prepare the journal entry to amortize the leasehold at the end of the first year. 3. On January 4, Leonard purchased a music distributor's collection of lyrics and songs for $1,425,000. The copyrights have a remaining life of another 30 years. Prepare the journal entry to amortize the copyright at the end of the first year.

The depreciation method that produces larger depreciation expense during the early years of an asset's life and smaller expense in the later years is a(an):

A total asset turnover ratio of 3.5 indicates that:

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

When a company constructs a building, the cost of the building includes materials and labor but not design fees, building permits, or insurance during construction.

A company purchased property for $100,000. The property included a building, a parking lot, and land. The building was appraised at $62,000; the land at $35,000, and the parking lot at $18,000. Land should be recorded in the accounting records with an allocated cost of:

Plant assets are reported on a balance sheet at their undepreciated costs (book value), not at fair (market) values.

Fortune Drilling Company acquires a mineral deposit at a cost of $5,900,000. It incurs additional costs of $600,000 to access the deposit, which is estimated to contain 2,000,000 tons and is expected to take 5 years to extract. -What journal entry would be needed to record the expense for the first year assuming 418,000 tons were mined?

Describe the accounting for natural resources, including their acquisition, cost allocation, and account titles.

An asset's cost includes all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use.

To capitalize an expenditure is to:

Crestfield leases office space for $7,000 per month. On January 3, the company incurs $12,000 to improve the leased office space. These improvements are expected to yield benefits for 10 years. Crestfield has 4 years remaining on its lease. What journal entry would be needed to record the expense for the first year related to the improvements?

What are some of the variables that make a plant asset's useful life difficult to predict?

Which of the following is an example of an extraordinary repair?

Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. -What would be the depreciation expense for the second year of its useful life using the double-declining-balance method?

The total cost of an asset less its accumulated depreciation is called:

Peavey Enterprises purchased a depreciable asset for $22,000 on April 1, Year 1. The asset will be depreciated using the straight-line method over its four-year useful life. -Assuming the asset's salvage value is $2,000, Peavey Enterprises should recognize depreciation expense in Year 2 in the amount of:

Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. - What would be the book value of the asset at the end of the first year of its useful life using the double-declining-balance method?

When the usefulness of plant assets used to extract natural resources is directly related to the depletion of a natural resource, their costs are depreciated using the units-of-production method of depreciation, as long as the assets will not be moved to and used at another site when extraction of the natural resources is complete.

A patent is an exclusive right granted to its owner to manufacture and sell a patented device or to use a process for 20 years.