Exam 9: Plant and Intangible Assets

Depreciation in financial statements Dynasty Co.uses straight-line depreciation in its financial statements,with depreciation for a partial year rounded to the nearest full month. On September 28,2018 Dynasty purchased equipment at a cost of $140,000.For financial reporting purposes,the useful life of this equipment was estimated at 5 years,with a $30,000 salvage value. Compute the depreciation expense relating to this equipment that Dynasty will recognize in its financial statements in the following years.If no depreciation will be recognized in a particular year,write zero.

Accumulated depletion is a contra-equity account and is recorded in the stockholders' equity section of the balance sheet.

Sum-of-the-years' digits is a popular depreciation method for small businesses due to its simplicity.

Harvard Company purchased equipment having an invoice price of $11,500.The terms of sale were 2/10,n/30,and Harvard paid within the discount period.In addition,Harvard paid a $160 delivery charge,$185 installation charge,and $931 sales tax.The amount recorded as the cost of this equipment is:

The basic purpose of the matching principle is to allocate the cost of an asset to expense over the years in which the asset contributes to revenue.Current accounting practice does not strictly apply this principle to expenditures for:

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

Machinery acquired new on January 1 at a cost of $80,000 was estimated to have a useful life of 10 years and a residual salvage value of $20,000.Straight-line depreciation was used.On January 1,following six full years of use of the machinery,management decided that the estimate of useful life had been too long and that the machinery would have to be retired after three years,that is,at the end of the ninth year of service.Under this revised estimate,the depreciation expense for the seventh year of use would be:

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.

Briefly explain the difference between a revenue expenditure and a capital expenditure.

[The following information applies to the questions displayed below.] On April 30,2017,Tilton Products purchased machinery for $88,000.The useful life of this machinery is estimated at 8 years,with an $8,000 residual value. -Assume that in its financial statements,Tilton Products uses the 150%-declining-balance method and the half-year convention.Depreciation expense in 2017 and 2018 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? (Round intermediate percentage calculations to 1 decimal place. )

Wilbur Company purchased $10,000 of equipment on December 20,2018 on terms 2/15,net 30.Wilbur paid for the equipment on the 15th day following purchase and took advantage of the discount.Which of the following statements is correct?

The write-down of an impaired asset is treated as a cash outflow from investing activities.

Assets are shown in the balance sheet at their book value.

The following expenditures are related to land,land improvements,and buildings,which were acquired on November 1,2018. Required: Determine the cost of the land,the building and the improvements (Round to the nearest dollar) Prepare journal entries on December 31,2018 for depreciation assuming the building will have a useful life of 20 years and no residual value.Use double declining balance method and the half-year convention.Depreciate the land improvements using straight-line method,a 5-year life,to the nearest month with zero residual value (to the nearest dollar).

Prepare journal entries for the following:

[The following information applies to the questions displayed below.] On April 30,2017,Tilton Products purchased machinery for $88,000.The useful life of this machinery is estimated at 8 years,with an $8,000 residual value. -Assume that in its financial statements,Tilton Products uses the 200%-declining-balance method and the half-year convention.Depreciation expense in 2017 and 2018 will be:

Sum-of-the-years' digits is a decelerated method of depreciation which produces less depreciation expense in the early years of the asset's life and more expense in the later years.

For financial reporting purposes,the gain or loss on the sale of a plant asset is determined by comparing the asset's: