Exam 9: Plant and Intangible Assets

The fair market value of Lewis Company's net identifiable assets is $5,000,000. Martin Corporation purchases Lewis' entire business for $5,800,000. Which of the following statements is not correct?

Sales tax on equipment is not part of the acquisition cost and should not be capitalized.

Land improvements are not subject to depreciation.

Machinery is purchased on May 15, 2009 for $50,000 with a $5,000 salvage value and a five year life. The half year convention is followed. What method of depreciation will give the highest amount of depreciation expense in year 2?

Total stockholders' equity of Tucker Company is $4,000,000. The fair market value of Tucker's net identifiable assets (assets less liabilities) is $5,000,000. Empire Corporation makes an offer to purchase Tucker's entire business for $5,800,000. In this situation:

Refer to the information above. If Victor uses straight-line depreciation with the half-year convention, the book value of the equipment at December 31, 2010 will be:

After March, 2004 international standards required that goodwill:

All of the following may be considered intangible assets except:

Declining balance depreciation On July 6, 2011, Grayson purchased new machinery with an estimated useful life of 10 years. The cost of the equipment was $80,000, with a residual value of $8,000. Compute the depreciation on this machinery in 2011 and 2012 using each of the following methods.

In February 2012, Gemstone Industries purchased the Opal Mine at a cost of $20,000,000. The mine is estimated to contain 500,000 carats of stone and to have a residual value of $1,000,000 after mining operations are completed. During 2012, 50,000 carats of stone were removed from the mine and sold. In this situation:

The book value of plant assets (other than land):

Compute the book value of the stallion at May 31, 2009, the date of sale. $______________

In the space provided below, prepare the journal entry to record the sale of the stallion on May 31, 2009. (Use Breeding Stock as the title of the asset account. Assume that depreciation to date of sale already has been recorded.)

The legal life of most patents is:

Which of the following statements is (are) correct?

Computation of goodwill The income of Greystone, Inc., during the last several years has averaged $765,000 annually. The company is now being offered for sale as a going concern. The value of Greystone's net identifiable assets (total assets minus all liabilities) at the present time is $4,675,000. One of several corporations interested in buying Greystone, offers to pay an amount equal to the value of the net identifiable assets and to assume all liabilities. In addition, this prospective buyer is willing to pay for goodwill an amount equal to net earnings in excess of 10% on net assets, expected to continue four years. You are to use the above information as a basis for computing the price that the investing corporation will offer for Greystone, Inc. $_______________

Coca-Cola's famous name printed in distinctive typeface is an example of:

Which of the following is a capital expenditure?

The journal entry to record depreciation expense consists of a credit to Accumulated Depreciation and a debit to the asset being depreciated.

Goodwill-financial reporting considerations Cabot Corporation's balance sheet at December 31, 2009, includes an asset entitled goodwill in the amount of $900,000, net of accumulated amortization. (a) Briefly explain what is meant by the term goodwill. (b) Under what circumstances is goodwill recorded in the accounting records? Include in your Answer a specific situation in which Cabot would have recorded the goodwill mentioned above.