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Exam 8: Reporting and Interpreting Property, Plant, and Equipment; Natural Resources; and Intangibles

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Question 1

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On January 1,2009,Boston Company purchased a heavy duty machine having an invoice price of $13,000; Boston paid transportation and installation costs totaling $3,000.The machine is estimated to have a 4-year useful life and a $1,000 residual value.Calculate depreciation expense and book value for 2009 - 2012,assuming 150% declining-balance method of depreciation.(Round to the nearest dollar.)

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To calculate the depreciation expense an...

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Question 2

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Tangible long-lived productive assets differ from intangible long-lived productive assets in that tangible assets have physical substance whereas intangible assets have no physical substance.

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B) False

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Question 3

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Which of the following accounts would not be considered an intangible asset?

A company purchased equipment for $800,000 and has depreciated it using the straight-line method for the past 5 years when its original life was estimated to be 10 years with a $200,000 residual value.The equipment's utility to the company has declined because they expect it to generate net cash flows over the remaining years of $300,000.The asset's fair value at the end of the fifth year is $200,000.If the asset has been impaired,record the journal entry to record the impairment.

Landmark Restaurants reported net income in 2008 of $45.9 million and depreciation expense of $48.8 million.They also report additions to property and equipment of $162.9 million.Which of the following disclosures would appear on the 2008 statement of cash flows?

Carter Company disposed of an asset at the end of the eighth year of its estimated life for $10,000 cash.The asset's life was originally estimated to be 10 years.The original cost was $50,000 with an estimated residual value of $5,000.The asset was being depreciated using the straight-line method.What was the gain or loss on the disposal?

Which of the following statements is incorrect?

A company acquires land by issuing 10,000 shares of its $10 par value common stock currently trading at $20 per share and the appraised value of the land is $250,000.Which of the following statements correctly describes the recording of the land?

On January 1,2010,Trenton Company purchased a machine costing $50,000.Trenton also incurred the following costs: transportation,$1,000; installation,$2,000; and sales tax,$3,000.Prepare the journal entry to record the machine acquisition assuming cash was paid.

Which of the following properly describes the accounting for goodwill?

Beckworth Company purchased a truck on January 1,2009,at a cash cost of $10,600.The estimated residual value was $400 and the estimated useful life 4 years.The company uses straight-line depreciation computed monthly.On July 1,2012,the company sold the truck for $1,900 cash. A.What was the depreciation expense amount per month? B.What was the amount of accumulated depreciation at July 1, 2012? C.Give the required journal entries on the date of disposal, July 1, 2012.(Assume no 2012 depreciation had yet been recorded)

Why is the continuity assumption important with respect to the accounting for long-lived tangible assets?

Natural resource depletion expense is recognized on the income statement for all resources removed during the period whether they are sold or not.

Give the required adjusting journal entry at December 31,2011,the end of the annual accounting period for the three items below.Assume that no adjusting entries have been made during the year.If no entry is required,explain why. A.Polk Company acquired a patent that cost $6,000 on January 1, 2011.The patent was registered on January 1, 2006.The useful life of a patent is 20 years from registration. B.Polk Company acquired a gravel pit on January 1, 2011, that cost $24,000.The company estimates that 30,000 tons of gravel can be extracted economically.During 2011 4,000 tons were extracted and sold. C.On January 1, 2011, Polk Company acquired a used dump truck that cost $6,000 to use hauling gravel.The company estimated a residual value of 10% of cost and a useful life 4 years.The company uses straight-line depreciation.

Patents,trademarks,and franchises are examples of tangible assets.

On January 1,2010 equipment was purchased for $100,000; the equipment's estimated residual value is $20,000 and its estimated useful life is 8 years.On December 31,2010,the book value using the straight-line method of depreciation is $90,000.

On January 1,2010,Woodstock,Inc.purchased a machine costing $40,000.Woodstock also paid $1,000 for transportation and installation.The expected useful life of the machine is 6 years and the residual value is $5,000.How much is the annual depreciation expense assuming use of the straight-line depreciation method?

Which of the following statements is incorrect?

Covey Company purchased a machine on January 1,2010,by paying cash of $250,000.The machine has an estimated useful life of five years,is expected to produce 500,000 units,and has an estimated residual value of $25,000. Requirements: A.Calculate determine depreciation expense (to the nearest dollar) for each year of the machine's useful life under (1.) straight-line depreciation; and (2.) the 200% declining balance method. B.What is the book value of the machine after three years using the 200% declining- balance method? C.What is the book value of the machinery after three years with straight-line depreciation? D.If the machine was used to produce and sell 120,000 units in 2010, what would the depreciation expense be under the units of production method?

Which of the following statements is false?