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Exam 10: Plant Assets, Natural Resources, and Intangibles

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Question 51

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Owning a patent:

A) Gives the owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 70 years.
B) Gives the owner exclusive rights to manufacture and sell a patented item or to use a process for 20 years.
C) Gives its owner an exclusive right to manufacture and sell a device or to use a process for 50 years.
D) Indicates that the value of a company exceeds the fair market value of a company's net assets if purchased separately.
E) Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 17 years.

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

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Question 52

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On July 1 of the current year,Timberlake Company signed a contract to sublease space in a building for 7 years.Timberlake Company paid $56,000 for the right to sublease this space.After taking possession of the leased space,Timberlake pays $140,000 for improving the office portion of the lease space.The improvements are paid on July 6 of the current year,and are estimated to have a useful life equal to the 14 years remaining in the life of the building.Prepare entries for Timberlake to record (a)its payment for the right to sublease the building space, (b)its payment for the office improvements, (c)the December 31 year-end entry to amortize the cost of the sublease, (d)the December 31 year-end entry to amortize the office improvements.

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Question 53

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During the current year,a company exchanged an old truck costing $58,000 with accumulated depreciation of $52,000 for a new truck.The new truck had a cash price of $80,000 and the company received a $16,000 trade-in allowance on the old truck with the balance of $64,000 paid in cash.Prepare the journal entry to record the exchange,assuming the transaction lacked commercial substance.

Marlow Company purchased a point of sale system on January 1 for $3,400.This system has a useful life of 10 years and a salvage value of $400.What would be the depreciation expense for the second year of its useful life using the double-declining-balance method?

A company purchased a tract of land for its natural resources at a cost of $1,500,000.It expects to mine 2,000,000 tons of ore from this land.The salvage value of the land is expected to be $250,000.The depletion expense per ton of ore is:

Victory Company purchases office equipment at the beginning of the year at a cost of $15,000.The machine's useful life is estimated to be 7 years with a $1,000 salvage value.The journal entry to record the first year depreciation is:

The formula to compute annual straight-line depreciation is:

A company purchased a machine on January 1 of the current year for $750,000.Calculate the annual depreciation expense for each year of the machine's life (estimated at 5 years or 20,000 hours,with a salvage value of $75,000)using each of the below-mentioned methods.During the machine's 5-year life its hourly usage was: 3,000;4,000;5,000;5,000;and 3,000 hours.

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 benefit of using an accelerated depreciation method is that:

A company purchased a mineral deposit for $800,000.It expects this property to produce 120,000 tons of minerals and to have a salvage value of $50,000.In the current year,the company mined and sold 9,000 tons of minerals.Its depletion expense for the current period equals:

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.What journal entry would be needed to record the machines' second year depreciation under the units-of-production method?

The cost of land would not include:

Ordinary repairs meet all of the following criteria except:

A company purchased equipment on June 28 of the current year and placed it in service on August 1.The following costs were incurred in acquiring the equipment: Determine the amount to be recorded as cost for the equipment.

On April 1 of the current year,a company disposed of a truck that had cost $20,000.The truck had a salvage value of $2,000,and a useful life of 5 years.The accounting records showed accumulated depreciation for this truck of $8,100 as of April 1 of the current year.The asset was discarded after an accident,and $10,500 cash was received from an insurance claim.Prepare the journal entry to record the disposal of the truck.

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.

An asset can be disposed of by all of the following except:

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 double-declining-balance method.

Riverboat Adventures pays $310,000 plus $15,000 in closing costs to buy out a competitor.The real estate consists of land appraised at $35,000,a building appraised at $105,000,and paddleboats appraised at $210,000.Compute the cost that should be allocated to the land.