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

Tasty Catering purchased a van on January 1,2015,for $48,000.The company decided to depreciate the van over a five-year period using the straight-line method.The company estimated its residual value at $3,000.Show how the costs should be presented on Tasty's balance sheet and income statement for the full year ended June 30,2017.Label the statements properly.

Many companies use MACRS (Modified Accelerated Cost Recovery System)depreciation for tax purposes. ​ If a company uses MACRS for depreciation for tax purposes,can it use a different method for financial reporting? Explain why or why not.

Capitalizing an expenditure rather than recording it as a revenue expenditure

Burgess Company purchased an asset on January 1,2015,for $10,000.The asset was expected to have a ten-year life and a $1,000 salvage value.The company uses the straight-line method of depreciation.On January 1,2017,the company determines that the asset will last only five more years.Calculate the amount of depreciation for 2017.

Fill in the table shown below indicating the period of time over which each intangible asset should be amortized,and indicate the amount of amortization expense that should be reported for 2017. Goodwill Trademark Cost \ 80,000 \ 55,000 Date of purchase June 30,2017 January 1,2017 Legal life Forever 20 years Useful life 60 years 10 years 2017 Am ontization expense

Land is not a depreciable asset,but the amount allocated to the building is subject to __________.

Florence,Inc.purchased equipment at the beginning of 2017 for $140,000.The company decided to depreciate the equipment over a ten-year period using the double-declining-balance method.The company estimated the equipment's salvage value at $12,000.Show how the costs should be presented on Florence's financial statements at December 31,2018.Label the statements properly.

A company uses the same depreciation method as other firms in the same industry.Because of this,investors will have enhanced comparability of the financial reporting results.

For each of the following sentences ,select the word or group of words that best completes the statement. Patent Copyright Goodwill Revenue expenditure Natural resources Research and development costs Trademark Capital expenditure -_____________ is(are)the expenditure(s)incurred in the discovery of new knowledge and the translation of research into a design or plan for a new product.

At December 31,2017,Ashland Company has the following amounts on its financial statements: Property, plant, and equipment \ 10,000 Accumulated depreciation 5,000 Total assets at January 1,2017 30,000 Total assets at December 31,2017 40,000 Net sales 62,000 Depreciation expense 1,000 Based on this information,calculate the following ratios: (1)Average life of the assets (2)Average age of the assets (3)Asset turnover

Mega Industries has an intangible asset that is being amortized over a ten-year time period.However,a competitor has just introduced a new product that will have a serious negative impact on the asset's value.Should the company continue to amortize the intangible asset over the ten-year life? Explain.

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.What amount should be recorded as depreciation expense each year starting in 2017?

Barnhill,Inc.uses straight-line depreciation for its equipment with an estimated useful life of ten years and zero residual value.The CEO points out that the equipment will last much longer than ten years,perhaps up to 20 years.What is the impact on earnings per share and net income of depreciating equipment over 20 years rather than ten years?

Relative to plant assets,how can a company report a net loss for a period and yet still have positive cash flows from operating activities?

Norwood, Inc. Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of eight years, or 12,500 hours of operation. The crane was purchased on January 1, 2017, and was used 2,700 hours in 2017 and 2,600 hours in 2018. -Refer to the information for Norwood,Inc. What amount will Norwood,Inc.report as depreciation expense over the eight-year life of the equipment?

At the end of 2017,Clock Products,Inc.determined that one of its patents was worthless.The patent had a cost of $300,000.The patent had been amortized for five years of its estimated 15-year legal life.Which of the following statements is correct?

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 31,2018?

?Imperial Corp.purchased land and a building for $425,000.The appraised values of the land and the building were $150,000 and $450,000,respectively.In addition,the attorney was paid $10,000 for handling the closing on the property. A. What amounts will be recorded as the costs of the land and building? B. What is the accounting justification against increasing the Land and Building accounts for their appraised values?

All of the following are intangible assets except

Boalsburg Co.purchased a truck on January 1,2015,for $30,000.The truck had an estimated life of five years and an estimated residual value of $5,000.Boalsburg used the straight-line method to depreciate the asset.On July 1,2017,the truck was sold for $17,000 cash.The journal entry to record the sale of the truck in 2017