Exam 9: Plant and Intangible Assets

Clark Imports sold a depreciable plant asset for cash of $35,000. The accumulated depreciation amounted to $70,000, and a loss of $5,000 was recognized on the sale. Under these circumstances, the original cost of the asset must have been:

The cost of a new windshield wiper on a delivery vehicle would be classified as:

Goodwill is only recorded when the value of a company increases and not when it decreases in value.

The balance sheet always reflects a company's current values.

The entry to record amortization on a copyright would include:

Trade-ins Dietz owned a delivery van with a book value of $2,000. It traded this old van in on a new one which cost $16,000. The dealer allowed Dietz a trade-in allowance of $3,500 on the old van, and Dietz paid the remainder in cash. Compute the following:

Computation of goodwill Chopin Corporation has net assets (total assets minus total liabilities) valued at $880,000 and has earned an average net income of $132,000 per year for the past several years. Sands Company is negotiating the purchase of the company and has agreed to pay an amount equal to the value of the net identifiable assets, assume the liabilities, and pay a sum for goodwill equal to the earnings in excess of 12% on net assets, expected to continue for five years. What is the amount for goodwill Sands is including in its offer? $_______________

Land and a warehouse were acquired for $890,000. What amounts should be recorded in the accounting records for land and for the warehouse if an appraisal showed the estimated values to be $400,000 for the land and $700,000 for the warehouse?

If an asset is determined to be impaired, it should be:

Assume Lloyd uses 200%-declining-balance depreciation with the half-year convention. Depreciation expense to be recognized in 2010 (the second year of ownership) is:

The tax basis of a depreciable asset generally is higher than the book value of that asset for financial reporting purposes.

For the financial statements of publicly traded companies, MACRS:

Gains and losses in financial statements and tax returns Explain why the amount of gain or loss resulting from the sale of a depreciable asset usually differs between the seller's financial statements and income tax return. In which of these accounting reports is the gain usually larger (or the loss smaller)? Explain your reasoning.

With respect to depreciation policies, the principle of consistency means:

Refer to the information above. Assume that in its financial statements, Victor uses straight-line depreciation and rounds depreciation for fractional years to the nearest whole month. Depreciation recognized on this equipment in 2009 and 2010 will be:

Which of the following is not a capital expenditure?

Assume Lloyd uses the units-of-output method and that the machine was in operation for 1,000 hours in 2009 and 1,800 hours in 2010. The book value of the machine at December 31, 2010 is:

Land is purchased for $456,000. Additional costs include a $30,300 fee to a broker, a survey fee of $3,400, $2,750 to construct a fence, and a legal fee of $12,500. What is the cost of the land?

Early in the current year, Amazon Co. purchased the Rio Silver Mine at a cost of $30,000,000. The mine was estimated to contain 400,000 tons of ore and to have a residual value of $7,500,000 after mining operations are completed. During the year, 115,000 tons of ore were removed from the mine. At year-end, the book value of the mine is:

Depreciation is a process of asset valuation.