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

Fortune Company has ten delivery trucks that became fully depreciated in the prior year.Fortune will continue charging the same amount of depreciation as before so that there will be no decrease in expenses.

Wind Chime Co.and Fire Hut Co.each purchased identical equipment having an estimated useful life of ten years for the same price.Wind Chime uses the straight-line depreciation method and Fire Hut uses the double-declining-balance method of depreciation.Assuming the two entities are similar in all other respects,which of the following statements is correct?

In general,FASB standards concerning property,plant,and equipment are similar to the international accounting standards,with a few important differences.

Which of the following is an example of a capital expenditure?

One reason management may choose the straight-line method of depreciation is because it is easy to compute.

Interest included as part of the construction cost of the asset is referred to as __________ of interest.

Fall Corp.uses plant assets that are subject to rapid decreases in value due to obsolescence and physical deterioration.Which of the following depreciation methods is most appropriate to measure the decline in the usefulness of the company's assets?

Wexford Co. Wexford Co. purchased a new delivery truck at the beginning of 2017. The truck has a cost of $37,000, an estimated life of five years, and an estimated residual value of $7,000. A full year's depreciation expense is to be recorded in 2017. The truck was driven 20,000 miles during 2017 and 24,000 miles during 2018. The number of expected miles over five years is 100,000. -Refer to the information for Wexford Co. By what amount would double-declining-balance depreciation exceed straight-line depreciation over the five-year life of the truck?

If a company constructs an asset over a period of time and borrows money,the amount of interest incurred during construction on the borrowed money is

Royal Company purchased a dump truck at the beginning of 2015 at a cost of $60,000.The truck had an estimated life of six years and an estimated residual value of $24,000.On January 1,2017,the company made major repairs of $20,000 to the truck that extended the life one year.Thus,starting with 2017,the truck has a remaining life of five years and a new salvage value of $8,000.Royal uses the straight-line depreciation method.When calculating depreciation for 2017,Royal should

Biglersville Corp.purchased equipment at the beginning of 2017 for $16,000.Biglersville Corp.decided to depreciate the equipment over a five-year period using the straight-line method.Biglersville Corp.estimated the equipment's residual value at $1,000.The estimated fair market value at the end of 2017 was $15,000.Which of the following statements is correct concerning Biglersville Corp.'s financial statements at December 31,2017?

Fulsom Co.began construction of a new factory at the beginning of 2017.At the end of the year,construction was completed,and construction costs totaled $200,000.Fulsom borrowed $180,000 at the beginning of 2017 to finance the construction and repaid the loan at the end of 2017.The interest rate on the loan was 9%.Determine the following amounts. A. The actual interest incurred on the construction loan during 2017 . B. The interest to be capitalized for 2017 . C. The total cost of the factory reported on the balance sheet. D. What impact does capitalizing interest have on net income for 2017? Explain.

If a company is concerned about minimizing its income tax burden,it would use the straight-line depreciation method to accomplish this objective.

Hu Corporation Use the following Assets section of Hu Corporation's balance sheets for the years ended December 31,2018 and 2017 to answer the questions that follow. ​ Hu Corporation recorded depreciation expense of $344 million for 2017. -Refer to the information for Hu Corporation. Required (1)Explain the impact on net income and cash flows of Hu using straight-line depreciation for financial reporting and accelerated depreciation methods for income tax purposes. (2)In the notes to the financial statements,Hu indicates that it uses different depreciation methods for different types of plant and equipment assets.Explain why Hu might follow this policy.

Harkin Company purchased a building on a tract of land and allocated the entire cost of the purchase to building.Normally,it depreciates buildings over 20 years using the straight-line method with zero residual value and does not depreciate land.Because of its accounting treatment of the purchase,Harkin's income before taxes for the next 20 years will be

On January 1, 2017, Grove City Corp. purchased a ship for $2,000,000. It has a ten-year useful life and a residual value of $50,000. The company uses the double-declining-balance method. -What was the depreciation expense for Grove City Corp.for the year ended December 31,2017?

A machine with a cost of $100,000 and accumulated depreciation of $80,000 was sold at a loss of $6,000.What amount of cash was received from the sale?

Below are several accounts and balances from the 2017 financial statements for Torrent,Inc.Prepare the Intangible Asset section of the company's balance sheet,as well as a partial income statement in the space provided below using the accounts provided. ? Amortization expense \ 32,000 Amortization since inception 89,000 Loss on sale of copyright 12,000 Copyright 120,000 Patents 60,000 Land 80,000 Goodwill 140,000 Research and development costs 160,000

Depreciation is a process by which

Why do many companies use one method to calculate depreciation for the income statement developed for stockholders and another method for income tax purposes?