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

On January 1,2014,Humansville Company purchased a piece of equipment with a list price of $80,000.The following amounts were related to the equipment purchase: - Terms of the purchase were 2/10,net 30.Humansville paid for the purchase on January 8. - Freight costs of $1,250 were incurred. - A state agency required that a pollution control device be installed on the equipment at a cost of $3,300. - During installation,the equipment was damaged and repair costs of $4,200 were incurred. - Architect's fees of $6,100 were paid to redesign the work space to accommodate the new equipment. - Humansville purchased liability insurance to cover possible damage to the asset.The three-year policy cost $8,700. - Humansville financed the purchase with a bank loan.Interest of $4,600 was paid on the loan during 2014. REQUIRED: Determine the acquisition cost of the equipment.

With respect to operating assets,the two different transactions that would appear in the investing activities category of the statement of cash flows are __________________________________ and __________________________________

Distinguish between current assets and operating assets.

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 2013.

Explain what costs are included in the acquisition cost of operating assets.

Fortune Company has 10 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.

Which of the following costs related to the purchase of production equipment incurred by Lincoln Company during 2011 would be considered a revenue expenditure?

The two items that must be estimated with respect to a plant asset in order to properly allocate cost to the affected accounting periods are ______________________________ and ______________________________.

The income statement of Hope Market,Inc.reported a gain from the sale of land.How are the cash flow effects of this transaction reported on the statement of cash flows if the direct method is used to prepare the Operating Activities category?

A company purchased an asset on January 1,2012,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 1,2014,the company made a major repair to the asset of $5,000, extending its life.The asset is expected to last ten years from January 1,2014. Calculate the amount of depreciation for 2014.

Acquisition cost includes all of the costs that are normal and necessary to acquire and maintain a plant asset over its useful life

Duggard Transport Company On January 1,2013,Duggard Transport Company 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 book value of the ship for Duggard Transport at the end of the useful life?

The accounting life of intangible assets is determined by

Blanket Airlines acquires a new aircraft.It has an estimated life of 15 years and should be used for 15,000 hours of flight.What is the most appropriate method of depreciation to properly match revenues and expenses?

Central National Bank recently acquired a new computer system.Which of the following costs associated with the computer should not be debited to the Equipment account?

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

If a company's asset turnover ratio decreased from 2012 to 2013,which of the following conclusions can be made?

Captain Lewis,Inc.purchased equipment at the beginning of 2014 for $60,000.In addition,Captain Lewis' paid $2,000 for delivery of the equipment to its plant and $1,000 for installation of the equipment.The equipment has an estimated residual value of $7,000 and an estimated life of 7 years or 70,000 hours of operation.Captain Lewis' is looking at alternative depreciation methods for the equipment.Calculate the following:

Acquisition cost should not include expenditures unrelated to the acquisition,like repair costs for damages incurred during installation,or costs incurred after the asset was installed and use begun.

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.