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Exam 10: Plant Assets, Natural Resources, and Intangibles

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Question 31

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Hunter Sailing Company exchanged an old sailboat for a new one.The old sailboat had a cost of $160,000 and accumulated depreciation of $100,000.The new sailboat had an invoice price of $270,000.Hunter received a trade in allowance of $70,000 on the old sailboat,which meant the company paid $200,000 in addition to the old sailboat to acquire the new sailboat.If this transaction lacks commercial substance,what amount of gain or loss should be recorded on this exchange?

A) $0 gain or loss.
B) $10,000 gain.
C) $10,000 loss.
D) $60,000 loss.
E) $70,000 loss.

F) A) and B)
G) B) and D)

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Question 32

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Amortization is:

A) The systematic allocation of the cost of an intangible asset to expense over its estimated useful life.
B) The process of allocating to expense the cost of a plant asset to the accounting periods benefiting from its use.
C) The process of allocating the cost of natural resources to periods when they are consumed.
D) An accelerated form of expensing an asset's cost.
E) Also called depletion.

F) A) and B)
G) A) and C)

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Question 33

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One characteristic of plant assets is that they are:

Which of the following statements regarding increases in the value of plant assets under U.S.GAAP and IFRS is true?

McClintock Co.had the following transactions involving plant assets during Year 1.Unless otherwise indicated,all transactions were for cash. Prepare the general journal entries to record these transactions.

A company purchased and installed machinery on January 1 at a total cost of $93,000.Straight-line depreciation was calculated based on the assumption of a five-year life and no salvage value.The machinery was disposed of on July 1 of year four.The company uses the calendar year. 1.Prepare the general journal entry to update depreciation to July 1 in year four. 2.Prepare the general journal entry to record the sale of the machine for $27,000 cash.

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:

Holding a copyright:

On July 1 of the current year,Glover Mining Co.pays $5,400,000 for land estimated to contain 7,200,000 tons of recoverable ore.It installs machinery on July 3 costing $864,000 that has an 8 year life and no salvage value and is capable of mining the ore deposit in six years.The company removes and sells 745,000 tons of ore during its first six months of operations ending on December 31.Depreciation of the machinery is in proportion to the mine's depletion as the machinery will be abandoned after the ore is mined.Prepare the entries Glover must record for (a)the purchase of the ore deposit, (b)the costs and installation of the machinery, (c)the depletion assuming the land has a zero salvage value,and (d)the depreciation on the machinery.

The depreciation method that recognizes equal amounts of annual depreciation over the life of an asset is _______________________________.

A company needed a new building.It found a suitable location with an existing old building on the land.The company reached an agreement to buy the land and the building for $960,000 cash.The old building was demolished to make way for the needed new building.Following is information regarding the demolition of the old building and construction of the new one: Prepare a single journal entry to record the above costs assuming all transactions are paid in cash.

A company purchased equipment valued at $66,000.It traded in old equipment for a $9,000 trade-in allowance and the company paid $57,000 cash with the trade-in.The old equipment cost $44,000 and had accumulated depreciation of $36,000.This transaction has commercial substance.What is the recorded value of the new equipment?

A machine costing $75,000 is purchased on September 1,Year 1.The machine is estimated to have a salvage value of $10,000 and an estimated useful life of 4 years.Double-declining-balance depreciation is used.If the machine is sold on December 31,Year 3 for $13,000,the journal entry to record the sale will include:

A company traded an old forklift for a new forklift,receiving a $13,500 trade-in allowance and paying the remaining $47,200 in cash.The old forklift had cost $43,000,a 5-year useful life and a $5,000 salvage value.Straight-line accumulated depreciation of $27,200 had been recorded as of the exchange date. 1.What was the book value of the old forklift on the date of the exchange? 2.What amount of gain or loss (indicate which)should be recognized in recording the exchange,assuming the transaction has commercial substance? 3.What amount should be recorded as the cost of the new forklift?

Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $87,000.The machine's useful life is estimated to be 5 years,or 400,000 units of product,with a $7,000 salvage value.During its second year,the machine produces 84,500 units of product.Determine the machines' second year depreciation under the straight-line method.

A company purchased a cooling system on January 2 for $225,000.The system had an estimated useful life of 15 years.On January 3 of the thirteenth year,the company completed a renovation of the system at a cost of $33,000 and now expects the system to be more efficient and last 8 years beyond the original estimate.The company uses the straight-line method of depreciation. (a)Prepare the journal entry at January 3,to record the renovation of the cooling system. (b)Prepare the journal entry at December 31,to record the revised depreciation for the thirteenth year.

Betterments are:

_________________ refers to a plant asset that is no longer useful in producing goods or services with a competitive advantage because of new inventions and improvements.

Spears Co.had net sales of $35,400 million.Its average total assets for the period were $14,700 million.Spears' total asset turnover equals:

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.What journal entry would be needed to record the expense for the first year assuming 38,000 tons were removed?