Exam 10: Plant Assets, Natural Resources, and Intangibles

If land is purchased as a building site, the cost of removing existing structures is not charged to the Land account.

A patent:

Rockport Company reports the following in millions: net sales of $25,355 for 2011 and $22,340 for 2010; end-of-year total assets of $15,875 for 2011 and $13,860 for 2010. Compute its total asset turnover for 2011 and assess its level if competitors average a total asset turnover of 2.0 times.

A change in an accounting estimate is:

On April 1, 2010, a company disposed of equipment for $14,200 cash that had cost $35,000 on January 1, 2006. The equipment had a salvage value of $5,000, and a useful life 10 years. The double-declining-balance depreciation method was used. On December 31, 2009, accumulated depreciation was $20,664. Prepare a journal entry to record depreciation for 2010 up to the date of disposal of the equipment, and prepare a journal entry to record the disposal of the equipment.

Carmel Company acquires a mineral deposit at a cost of $5,900,000. It incurs additional costs of $600,000 to access the deposit, which is estimated to contain 2,000,000 tons and is expected to take 5 years to extract. What journal entry would be needed to record the expense for the first year assuming 418,000 tons were mined?

Depreciation is the process of allocating the cost of a plant asset to expense in the accounting periods benefiting from its use.

A company purchased a plant asset for $45,000. The asset has an estimated salvage value of $6,000, and an estimated useful life of 10 years. The annual depreciation expense using the straight-line method is $3,900 per year. ($45,000 - $6,000)/10 = $3,900

A company had a bulldozer destroyed by fire. The bulldozer originally cost $125,000 with accumulated depreciation of $60,000. The proceeds from the insurance company were $90,000. The company should recognize:

A company purchased land with a building for a total cost of $2,570,000 ($500,000 paid in cash and the balance on a long-term note). It was estimated that the land and building had market values of $900,000 and $2,100,000, respectively. Determine the cost to be apportioned to the land and to the building and prepare the journal entry to record the acquisition.

_____________________ are revenue expenditures to keep an asset in normal, good operating condition; they are necessary if an asset is to perform to expectations over its useful life.

A company made the following expenditures in connection with the construction of its new building: Prepare a schedule showing the amounts to be recorded as Land, Buildings, and Machinery.

A company purchased a machine valued at $66,000. It traded in an old machine for a $9,000 trade-in allowance and the company paid $57,000 cash with the trade-in. The old machine cost $44,000 and had accumulated depreciation of $36,000. This transaction has commercial substance. What is the recorded value of the new machine?

A company purchased a machine for $75,000 that was expected to last 6 years and to have a salvage value of $6,000. At the beginning of the machine's fourth year the company decided that the estimated useful life should be revised to a total of 10 years instead of 6 years. Also, the salvage value was re-estimated to be $5,500. Straight-line depreciation was used throughout the machine's life. Calculate the depreciation expense for the fourth year of the machine's useful life.

Since goodwill is an intangible, it is amortized each year using the straight-line method, the same as other intangibles are amortized.

A company purchased mining property containing 7,350,000 tons of ore for $1,837,500. In Year 1, it mined and sold 857,000 tons of ore and in Year 2, it mined and sold 943,000 tons of ore. Calculate the depletion expense for Year 1 and Year 2. What was the book value of the property at the end of Year 2?

A company bought a new display case for $42,000 and was given a trade-in of $2,000 on an old display case, so the company paid $40,000 cash with the trade-in. The old case had an original cost of $37,000 and accumulated depreciation of $34,000. If the transaction has commercial substance, the company should record the new display case at:

If a machine is damaged during unpacking, the repairs are added to its cost.

Natural resources:

Mahoney Company had the following transactions involving plant assets during Year 1 and Year 2. Unless otherwise indicated, all transactions were for cash. Prepare the general journal entries to record these transactions.