Exam 9: Plant and Intangible Assets

Depreciation; gains and losses in financial statements In 2013,Amalfi,Inc.purchased equipment with an estimated 10-year life for $42,600.The residual value was estimated at $9,900.Amalfi uses straight-line depreciation and applies the half-year convention. On April 18,2015,Amalfi closed one of its plants and sold this equipment for $33,600.Under these assumptions,compute the following for this equipment:

The application of the matching principle to depreciation of plant and equipment can best be described as:

Declining balance depreciation On July 6,2014,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 2014 and 2015 using each of the following methods.

The book value of equipment:

All of the following may be considered intangible assets except:

On March 2,2014,Glen Industries purchased a fleet of automobiles at a cost of $550,000.The cars are to be depreciated by the straight-line method over five years with no salvage value.Glen uses the half-year convention to compute depreciation for fractional periods.The book value of the fleet of automobiles at December 31,2015,will be:

Land and a warehouse were acquired for $890,000.What amounts should be recorded in the accounting records for the 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?

The book value of an asset in the plant and equipment category is:

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 $4,675,000. One of several corporations interested in buying Greystone,offers to pay an amount equal to the value of the net identifiable assets and to assume all liabilities.In addition,this prospective buyer is willing to pay for goodwill an amount equal to net earnings in excess of 10% on net assets,expected to continue four years. You are to use the above information as a basis for computing the price that the investing corporation will offer for Greystone,Inc.$________________.

Capital expenditures are recorded as:

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

In the early years of an asset's life,straight-line depreciation will cause a company to report higher profits than would be reported with an accelerated depreciation method.

Which of the following assets is not subject to depreciation and whose usefulness does not decline over time?

Various depreciation methods-first year On March 24,2015 Tastee Ice Cream Co.purchased equipment costing $140,000,with an estimated life of 5 years and an estimated salvage value of $20,000. Compute the depreciation expense Tastee would recognize on this equipment in 2015,assuming:

Cranston Instrumentation sold a depreciable asset for cash of $150,000.The original cost of the asset was $600,000.Cranston recognized a gain of $22,500 on the sale.What was the amount of accumulated depreciation on the asset at the time of its sale?

Wilbur Company purchased $10,000 of equipment on January 20,2014.Wilbur uses the straight-line method to depreciate the equipment.The equipment has a 5-year useful life with no salvage value.Which of the following statements is correct?

Amortization expense increases net income and reduces cash flows from investing activities.

Straight-line is the most widely used depreciation method in financial statements,and MACRS is the most widely used method in federal income tax returns.

Annual depreciation expense is increased when salvage values are small.

U.S.GAAP requires a company to capitalize goodwill and adjust its value if subject to impairment.