Question 1

Granite Company purchased a machine costing $120,000,terms 1/10,n/30.The machine was shipped FOB shipping point and freight charges were $2,000.The machine requires special mounting and wiring connections costing $10,000.When installing the machine,$1,300 in damages occurred.Compute the cost recorded for this machine assuming Granite paid within the discount period.

Accepted Answer

A) $129,800. 
B) $132,100. 
C) $130,800. 
D) $118,800. 
E) $120,100.

Question 2

A company exchanged its used machine for a new machine in a transaction that had commercial substance.The old machine cost $68,000,and the new one had a cash price of $95,000.The company had taken $59,000 depreciation on the old machine and was allowed a $2,500 trade-in allowance and the balance of $92,500 was paid in cash.What gain or loss should be recorded on the exchange?

Accepted Answer

The answer of A company exchanged its used machine for...

Question 3

Depreciation:

Accepted Answer

A) Measures the decline in market value of an asset. 
B) Measures physical deterioration of an asset. 
C) Is the process of allocating the cost of a plant asset to expense. 
D) Is an outflow of cash from the use of a plant asset. 
E) Is applied to land.

Question 4

Fortune Drilling 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?

Accepted Answer

A) Debit Depletion Expense $1,233,100;credit Accumulated Depletion $1,233,100. 
B) Debit Amortization Expense $1,358,500;credit Accumulated Amortization $1,358,500. 
C) Debit Depreciation Expense $1,358,500;credit Accumulated Depreciation $1,358,500. 
D) Debit Depletion Expense $1,358,500;credit Accumulated Depletion $1,358,500. 
E) Debit Depreciation Expense $1,233,100;credit Accumulated Depreciation $1,233,100.

Question 5

A company had average total assets of $887,000.Its gross sales were $1,090,000 and its net sales were $1,000,000.The company's total asset turnover equals:

Accepted Answer

A) 0.81. 
B) 0.89. 
C) 1.09. 
D) 1.13. 
E) 1.23.

Question 6

Which of the following is not classified as plant assets?

Accepted Answer

A) Land. 
B) Land improvements. 
C) Buildings. 
D) Machinery and equipment. 
E) Patent.

Question 7

In year one,McClintock Co.acquired a truck that cost $75,500 with an estimated $14,000 salvage value and 4 year estimated useful life.Depreciation in the first year was $15,375.McClintock had the following transactions involving plant assets during Year 2.Unless otherwise indicated,all transactions were for cash.  Prepare the general journal entries to record these transactions.

Accepted Answer

The answer of In year one,McClintock Co.acquired a truck that...

Question 8

A company bought new heating system for $42,000 and was given a trade-in of $2,000 on an old heating system,so the company paid $40,000 cash with the trade-in.The old system 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 heating system at:

Accepted Answer

A) $2,000. 
B) $3,000. 
C) $40,000. 
D) $42,000. 
E) $43,000.

Question 9

A company purchased and installed equipment on January 1 at a total cost of $72,000.Straight-line depreciation was calculated based on the assumption of a five-year life and no salvage value.The equipment was disposed of on July 1 of the fourth year.The company uses the calendar year.
1.Prepare the general journal entry to update depreciation to July 1 in the fourth year.
2.Prepare the general journal entry to record the disposal of the equipment under each of these three independent situations:
a.The equipment was sold for $22,000 cash.
b.The equipment was sold for $15,000 cash.
c.The equipment was totally destroyed in a fire and the insurance company settled the claim for $18,000 cash.

Accepted Answer

The answer of A company purchased and installed equipment on...

Question 10

Additional costs of plant assets that provide benefits extending beyond the current period;they increase or improve the type or amount of service an asset provides are treated as _________________________________.

Accepted Answer

The answer of Additional costs of plant assets that provide...

Question 11

A leasehold is:

Accepted Answer

A) A short-term rental agreement. 
B) The same as a patent. 
C) The rights granted to the lessee by the lessor of a lease. 
D) Recorded as revenue expenditure when paid. 
E) An asset held as an investment.

Question 12

Peavey Enterprises purchased a depreciable asset for $22,000 on April 1,Year 1.The asset will be depreciated using the straight-line method over its four-year useful life.Assuming the asset's salvage value is $2,000,what will be the amount of accumulated depreciation on this asset on December 31,Year 3?

Accepted Answer

A) $5,000 
B) $15,000 
C) $15,125 
D) $20,000 
E) $13,750

Question 13

The calculation of total asset turnover is:

Accepted Answer

A) Gross profit divided by average total assets. 
B) Average total assets divided by gross profit. 
C) Net sales divided by average total assets. 
D) Average total assets multiplied by net sales. 
E) Net assets multiplied by total assets.

Question 14

The term inadequacy,as it relates to the useful life of an asset,refers to:

Accepted Answer

A) The insufficient capacity of a company's plant assets to meet the company's growing production demands. 
B) An asset that is worn out. 
C) An asset that is no longer useful in producing goods and services. 
D) The condition where the salvage value is too small to replace the asset. 
E) The condition where the asset's salvage value is less than its cost.

Question 15

Another name for a capital expenditure is:

Accepted Answer

A) Revenue expenditure. 
B) Asset expenditure. 
C) Long-term expenditure. 
D) Contributed capital expenditure. 
E) Balance sheet expenditure.

Question 16

On January 1,2016,a company disposed of equipment for $16,200 cash that had cost $35,000,a salvage value of $5,000,and a useful life 10 years.The double-declining-balance depreciation method was used.On December 31,2015,accumulated depreciation was $20,664.Prepare a journal entry to record the disposal of the equipment.

Accepted Answer

The answer of On January 1,2016,a company disposed of equipment...

Question 17

Greene 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.

Accepted Answer

The answer of Greene Company purchased a machine for $75,000...

Question 18

Peavey Enterprises purchased a depreciable asset for $22,000 on April 1,Year 1.The asset will be depreciated using the straight-line method over its four-year useful life.Assuming the asset's salvage value is $2,000,Peavey Enterprises should recognize depreciation expense in Year 2 in the amount of:

Accepted Answer

A) $10,000 
B) $5,000 
C) $5,500 
D) $20,000 
E) $9,250

Question 19

Bering Rock acquires a granite quarry at a cost of $590,000,which is estimated to contain 200,000 tons of granite and is expected to take 6 years to remove.Compute the depletion expense for the first year assuming 38,000 tons were removed.

Accepted Answer

A) $98,333. 
B) $93,158. 
C) $38,000. 
D) $12,881. 
E) $112,100.

Question 20

The depreciation method in which a plant asset's depreciation expense for a period is determined by applying a constant depreciation rate to the asset's beginning-of-period book value is called:

Accepted Answer

A) Book value depreciation. 
B) Declining-balance depreciation. 
C) Straight-line depreciation. 
D) Units-of-production depreciation. 
E) Modified accelerated cost recovery system (MACRS)depreciation.

Exam 10: Plant Assets, Natural Resources, and Intangibles