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Exam 10: Plant Assets Natural Resoures and Intangibles

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Question 61

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Once the estimated depreciation expense for an asset is calculated:

A) The estimate itself cannot be changed; however, new information should be disclosed in financial statement footnotes.
B) Any changes are accumulated and recognized when the asset is sold.
C) It may be revised based on new information.
D) It cannot be changed, based on the historical cost principle.
E) It cannot be changed, based on the consistency principle.

F) None of the above
G) A) and D)

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Question 62

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Plant assets can be disposed of by discarding, selling, or exchanging them.

A) True
B) False

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Question 63

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The modified accelerated cost recovery system (MACRS) :

An accelerated depreciation method yields larger depreciation expense in the early years of an asset's life and less depreciation expense in later years.

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:

A company paid $320,000 for equipment that was expected to last five years and to have a salvage value of $40,000. During the third year of the equipment's life, $39,000 cash was paid for replacement parts that were expected to increase productivity by 10% each year. Prepare the journal entry to record the $39,000 cost incurred in the third year.

Total depreciation expense over an asset's useful life will be identical under all methods of depreciation.

Martinez owns an asset that cost $87,000 with accumulated depreciation of $40,000. The company sells the equipment for cash of $42,000. At the time of sale, the company should record:

A company sold equipment that originally cost $100,000 for $60,000 cash. The accumulated depreciation on the equipment was $40,000. The company should recognize a:

Match the following definitions with the appropriate term

The straight-line depreciation method and the double-declining-balance depreciation method:

Westport Company reports the following in millions: net sales of $25,300 for 2016 and $22,640 for 2015; end-of-year total assets of $14,875 for 2016 and $13,680 for 2015. Compute its total asset turnover for 2016 and assess its level if competitors average a total asset turnover of 2.0 times.

Financial accounting and tax accounting require the same recordkeeping and there should be no difference in results between the two accounting systems.

On April 1, Year 1, Astor Corp. purchased and placed a plant asset in service. The following information is available regarding the plant asset: Acquisition cost $130,000 Estimated salvage value $15,000 Estimated useful life 5 years Make the necessary adjusting journal entries at December 31, Year 1, and December 31, Year 2 to record depreciation for each year under the straight-line depreciation method.

Decision makers and other users of financial statements are especially interested in evaluating a company's ability to use its assets in generating sales.

Companies that have a relatively large amount invested in assets to generate a given level of sales are considered capital-intensive.

A company had net sales of $1,540,500 in 2015 and $1,495,000 in 2016. Its average assets were $810,000 for 2015 and $800,000 for 2016. (1) Calculate the total asset turnover for each year. (2) Interpret and comment on the company's efficiency in the use of its assets.

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:

A company purchased a weaving machine for $190,000. The machine has a useful life of 8 years and a residual value of $10,000. It is estimated that the machine could produce 75,000 bolts of woven fabric over its useful life. In the first year, 15,000 bolts were produced. In the second year, production increased to 19,000 units. - Using the units-of-production method, what is the amount of depreciation expense that should be recorded for the second year?

A company purchased a special purpose machine on September 15 of the past year, and it was installed and ready to run on January 1 of this year. The following costs were incurred in the purchase and installation of the machine. Determine the total cost of the machine. $\begin{array} { l l } \text { Invoice price plus sales tax } & \$ 1,270,500 \\\text { Freight costs } & 9,000 \\\text { Setup costs } & 51,000 \\\text { Costs to adjust machine to appropriate specifications } & 36,000 \\\text { Electrical connections } & 32,000 \\\text { Maintenance supplies for future use } & 108,000 \\\text { Traffe fine incurred during transport of machine } & 300 \\\text { Cost of special foundation for machine } & 18,500\end{array}$