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

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Question 131

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Neosho Mining invested $840,000 in a mine estimated to have 1,200,000 tons of ore with no residual value. During the first year, 200,000 tons of ore were mined and sold. Instructions Prepare the journal entry to record depletion expense.

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Depletion Expense 14...

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Question 132

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The asset turnover ratio

A) Is computed by dividing net sales (income statement account) by average total assets (statement of financial position account) .
B) Measures how efficiently a company is using its net sales to purchase and use fixed assets.
C) Measures how many dollars are invested in fixed assets per dollar of net sales.
D) All of these answer choices are correct.

E) A) and B)
F) A) and D)

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Question 133

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Depletion expense for a period is only recognized on natural resources that have been extracted and sold during the period.

Steve White the new controller of Weinberg Company, has reviewed the expected useful lives and residual values of selected depreciable assets at the beginning of 2014. His findings are as follows. All assets are depreciated by the straight-line method. Weinberg Company uses a calendar year in preparing annual financial statements. After discussion, management has agreed to accept Steve's proposed changes. Instructions (a) Compute the revised annual depreciation on each asset in 2014. (Show computations.) (b) Prepare the entry (or entries) to record depreciation on the building in 2014.

In computing depreciation, residual value is

A truck that cost $84,000 and on which $70,000 of accumulated depreciation has been recorded was disposed of for $21,000 cash. The entry to record this event would include a

Nicklaus Company has decided to sell one of its old machines on June 30, 2014. The machine was purchased for $160,000 on January 1, 2010, and was depreciated on a straight-line basis for 10 years with no residual value. If the machine was sold for $52,000, what was the amount of the gain or loss recorded at the time of the sale?

A change in the estimated useful life of a plant asset may cause a change in the amount of depreciation recognized in the current and future periods, but not to prior periods.

Sargent Corporation bought equipment on January 1, 2014. The equipment cost €360,000 and had an expected residual value of €60,000. The life of the equipment was estimated to be 6 years. The depreciation expense using the straight-line method of depreciation is

For each entry below make a correcting entry if necessary. If the entry given is correct, then state "No entry required." (a) The $60 cost of repairing a printer was charged to Equipment. (b) The $5,000 cost of a major engine overhaul was debited to Maintenance and Repairs Expense. The overhaul is expected to increase the operating efficiency of the truck. (c) The $6,000 closing costs associated with the acquisition of land were debited to Legal Expense. (d) A $500 charge for transportation expenses on new equipment purchased was debited to Freight-In.

Grimwood Trucking purchased a tractor trailer for $196,000. Grimwood uses the units-of-activity method for depreciating its trucks and expects to drive the truck 1,000,000 miles over its 12-year useful life. Residual value is estimated to be $28,000. If the truck is driven 90,000 miles in its first year, how much depreciation expense should Grimwood record?

All of the following factors in computing depreciation are estimates except

Karnes Company purchased a truck for $44,000. The company expected the truck to last four years or 100,000 miles, with an estimated residual value of $4,000 at the end of that time. During the second year the truck was driven 27,000 miles. Compute the depreciation for the second year under each of the methods below and place your answers in the blanks provided. Units-of-activity $ Double-declining-balance $

Rooney Company incurred $420,000 of research costs in its laboratory to develop a patent granted on January 1, 2014. On July 31, 2014, Rooney paid $63,000 for legal fees in a successful defense of the patent. The total amount debited to Patents through July 31, 2014, should be:

Ron's Quik Shop bought machinery for $75,000 on January 1, 2013. Ron estimated the useful life to be 5 years with no residual value, and the straight-line method of depreciation will be used. On January 1, 2014, Ron decides that the business will use the machinery for a total of 6 years. What is the revised depreciation expense for 2014?

Payton Company purchased a machine on January 1, 2014, at a cost of $90,000. It is expected to have an estimated residual value of $5,000 at the end of its 5-year life. The company capitalized the machine and depreciated it in 2014 using the double-declining-balance method of depreciation. The company has a policy of using the straight-line method to depreciate equipment but the company accountant neglected to follow company policy when he used the double-declining-balance method. Net income for the year ended December 31, 2014 was $55,000 as the result of depreciating the machine incorrectly. Instructions Using the method of depreciation which the company normally follows, prepare the correcting entry and determine the corrected net income. (Show computations.)

Dayton Mining Company purchased land containing an estimated 15 million tons of ore at a cost of $6,000,000. The land without the ore is estimated to be worth $600,000. The company expects to operate the mine for 10 years. Buildings costing $500,000 are erected on the site and are expected to last for 25 years. Equipment costing $350,000 with an estimated life of 12 years is installed. The buildings and the equipment possess no residual value after the mine is closed. During the first year of operations, the mining company mined and sold 2 million tons of ore. Instructions (a) Compute the depletion charge per ton. (b) Compute the depletion expense for the first year. (c) Compute the appropriate first year's depreciation expense for the buildings. (d) Compute the appropriate first year's depreciation expense for the equipment. (e) Prepare journal entries to record depletion and depreciation expenses for the year.

Costs incurred during the research phase are reported as an intangible asset on the statement of financial position.

Mento, Inc. spent $4,500,000 during 2014 to repair and update its plant assets. This consisted of $1,800,000 to paint the building, $345,000 to place worn-out gears on motors, $960,000 to install special shelving that will increase operating efficiency in the plant, and $1,395,000 on new machinery. What amount of these costs would appear as assets on Mento, Inc.'s December 31, 2014 statement of financial position?

IFRS allows companies to revalue plant assets to fair value. Which of the following statements is true regarding revaluation?