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Exam 9: Plant Assets, Natural Resources, and Intangible Assets

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Question 71

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If a plant asset is retired before it is fully depreciated, and no salvage or scrap value is received,

A) a gain on disposal will be recorded.
B) phantom depreciation must be taken as though the asset were still on the books.
C) a loss on disposal will be recorded.
D) no gain or loss on disposal will be recorded.

E) B) and C)
F) B) and D)

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Question 72

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Equipment with an invoice price of $20,000 was purchased and freight costs were $900. The cost of the equipment would be $______________.

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Question 73

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All of the following factors in computing depreciation are estimates except

If a plant asset is sold before it is fully depreciated,

Accountants do not attempt to measure the change in a plant asset's fair value during ownership because

Salem Company hired Kirk Construction to construct an office building for £6,400,000 on land costing £1,600,000, which Salem Company owned. The building was complete and ready to be used on January 1, 2018 and it has a useful life of 40 years. The price of the building included land improvements costing £480,000 and personal property costing £600,000. The useful lives of the land improvements and the personal property are 10 years and 5 years, respectively. Salem Company uses component depreciation, and the company uses straight-line depreciation for other similar assets. What total amount of depreciation expense would Salem Company report on its income statement for the year ended December 31, 2018?

On July 1, 2018, Melton Inc. invested $560,000 in a mine estimated to have 800,000 tons of ore of uniform grade. During the last 6 months of 2018, 100,000 tons of ore were mined and sold. Instructions (a) Prepare the journal entry to record depletion expense. (b) Assume that the 100,000 tons of ore were mined, but only 85,000 units were sold. How are the costs applicable to the 15,000 unsold units reported?

Recording depreciation on plant assets affects the balance sheet and the income statement.

A characteristic of capital expenditures is that the expenditures occur frequently during the period of ownership.

Iverson Company purchased a delivery truck for $45,000 on January 1, 2018. The truck was assigned an estimated useful life of 5 years and has a residual value of $10,000. Compute depreciation expense using the double-declining-balance method for the years 2018 and 2019.

Which one of the following items is not a consideration when recording periodic depreciation expense on plant assets?

If a plant asset is retired before it is fully depreciated, and the salvage value received is less than the asset's book value,

Depletion is

Depletion cost per unit is computed by dividing the total cost of a natural resource by the estimated number of units in the resource.

The cost of successfully defending a patent in an infringement suit should be

A loss on disposal of a plant asset as a result of a sale or a retirement is calculated in the same way.

On October 1, 2018, Holt Company places a new asset into service. The cost of the asset is $120,000 with an estimated 5-year life and $30,000 salvage value at the end of its useful life. What is the depreciation expense for 2018 if Holt Company uses the straight-line method of depreciation?

Goodwill is an unusual asset in that it cannot be sold individually apart from a business as a whole. If goodwill is an intangible asset, why can't it be sold like other intangible assets such as copyrights and patents? Briefly explain what makes goodwill different.

If disposal of a plant asset occurs at any time during the year, ___________________ for the fraction of the year to the date of disposal must be recorded.

The calculation of depreciation using the declining balance method,