Exam 10: Property,plant and Equipment,and Intangibles

On September 30,2014,Sabena Industries acquired and placed in service a machine that cost $850,000.It was estimated that the machine has a service life of five years and a residual value of $69,400. Using the double-declining-balance method of depreciation,prepare a schedule showing the depreciation amounts for the years 2014 through 2019 (use the nearest whole month method and round answers to the nearest dollar).Sabena closes its books on December 31 of every year.

Machinery after two years worth of depreciation has an opening book value of $6,400.At the beginning of the third year,the predicted number of years remaining in its useful life changes from three years to four years and its estimated residual value changes from the original $1,000 to $400.The revised annual depreciation using the straight-line method is $1,500.

Shady Lanes installed automatic sprinkler systems.The electrical work for the installation was $24,000.The invoice price of the sprinkler equipment was $280,000.Additional costs were $5,000 for delivery and $800 for insurance during transportation.During installation a sprinkler line was punctured and was replaced for $200.What is the cost of the sprinkler equipment?

When assigning values to an exchange of assets you should use the fair value of the asset given up.

Accumulated depreciation represents funds set aside to buy new assets when the assets currently owned are replaced.

Wildcat Company purchased a heating system on January 2,2003,for $625,000.The system had an estimated useful life of 15 years,with no residual value.On January 2,2015,the company paid $33,000 cash for a complete renovation of the system,and now expects the system to last 5 years beyond the original estimate.The company uses the straight-line method of depreciation. (a)Prepare the journal entry at January 2,2015,to record the renovation of the heating system. (b)Prepare the journal entry at December 31,2015,to record the depreciation for 2015.

Revenue expenditures are expenditures to keep assets in normal operating condition.

Depreciation amounts can be revised because of changes in the estimates for residual value,useful life or because of subsequent revenue expenditures.

A copyright gives its owner the exclusive right to publish and sell a musical,literary,or artistic work during the life of the creator plus 20 years.

Each year goodwill is examined to see if its value has been impaired.If the value has been impaired goodwill will:

Hawaii Kai purchased a leasehold property for $8,500,000.The leasehold expires in 15 years.Prepare the journal entry to record the first year's depreciation expense.

SportsWorld purchased equipment costing $10,000.The equipment has a residual value of $1,000,and an estimated useful life of 5 years or 36,000 shoes.Actual units produced during the year were 7,000 units.Calculate annual depreciation using the straight line method.

Explain (1)depreciation for partial years and (2)revision of depreciation when estimates change.

Pink Lady Co needed a new building,and found a suitable piece of land which had an old building on it.Pink Lady made an agreement to buy the land and the building for $960,000 cash.The old building was demolished to make way for the new building. The following is information regarding the demolishing of the old building and construction of the new one: Prepare a single journal entry to record the above costs (assume all paid cash).

______________________ are costs that increase the usefulness of land,but have limited useful lives and are thus depreciated.

Non-current assets are any liabilities that are used in the operations of a business.

Wilkins Company exchanged its old computer for a newer model.The Old Computer was purchased for $22,000,with related accumulated depreciation of $15,500 to the date of the exchange.The new computer had a cash price of $30,200,and Wilkins Company was given a $7,500 trade-in allowance.This transaction has commercial substance.Prepare the general journal entry to record the exchange,recording the new computer in an account called New Computer.

Additional subsequent expenditures that result in future economic benefits and can be reliably measured should be treated as a(n):

At the time a plant asset is being discarded or sold,it is necessary to update the accumulated depreciation of the plant asset to the date of disposal.

Equipment costing $14,000 with accumulated depreciation of $10,000 was sold for $3,000.The company should recognize a $1,000 loss on disposal of the equipment.