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Exam 18: Property, Plant, and Equipment

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Question 21

True/False

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Use of the sum-of-the-years'-digits method of depreciation results in higher depreciation charges in the early years of an asset's life and lower charges in the later years.

A) True
B) False

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Question 22

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Amortization is the periodic transfer of an intangible's cost to expense done on a

A) straight-line or unit-of-production basis.
B) straight-line or sum-of-the years basis.
C) declining basis or percentage depletion basis.
D) percentage depletion or straight-line basis.

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

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Question 23

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An example of real property is

C C Coal Company purchased the coal rights in an area for $4,050,000.They estimated that the area contained 9,000,000 tons of coal.The first year of operations in the area yielded 110,000 tons of coal.What is the depletion cost per ton of coal? What is the depletion expense for this first year?

A company purchased equipment for $16,000 cash.In addition,the company paid $1,000 to have the equipment delivered and $500 to have it installed.The cost of this asset for financial accounting purposes is

The book value of an asset is

When an asset is acquired by trading in an asset already owned in exchange for the new one,the amount received on the trade-in is called the ______________.

All of the following refer to the handling of a decline in value of property,plant,and equipment except

The normal balance of Accumulated Depreciation is a(n)___________________.

On January 3,2016,the Soloman Toy Company purchased a machine for $24,000.The machine is expected to produce 200,000 units during its useful life of five years and have a salvage value of $2,000 at the end of that period.The machine produced 41,000 units in 2016,38,000 units in 2017,and 40,000 units in 2018.Prepare a schedule showing the annual depreciation for 2016,2017,and 2018 under the straight-line method and the units-of-output method.

Book value is used in determining gain or loss on the disposal of an asset.

The Haznot Company acquired a machine for a net cost of $21,600 in September of the current year.The salvage value was expected to be zero after 5 years of intensive use.Under the Sum-of-the-Years'-Digits method,the depreciation recorded in year two would be $6,720.

Under MACRS,the highest percent-resulting in the highest depreciation expense-occurs during which year?

Under GAAP and the conservatism principle,losses on trade-ins are recognized and recorded but gains on trade-ins are not allowed.

JRB Preschool purchased a van used in the business three years ago for $36,500.The accumulated depreciation account related to the equipment asset account had a balance of $18,000.The equipment had an estimated salvage (residual)value of $6,500 and had an estimated life of five years.A full year's depreciation was taken the first year.JRB uses the straight-line depreciation method.All depreciation is usually recorded at yearend.The company sold the equipment in exchange for a promissory note on July 1 of the current year for $12,000.Record the appropriate entries necessary.

Patents and copyrights are intangible assets.

Blue Box Company was purchased for $115 million 10 years ago by the Big Box Company.The assessed (market) value of assets at the time of purchase was estimated at $90 million and the additional cash paid over the purchase price was recorded as goodwill.As a result of various product defects over the years,the market value of the Blue Box acquisition dropped to $80 million.Big Box recorded the corresponding impairment loss but instead of spinning off the division,management at Big Box invested heavily this past year in quality improvement programs that resulted in an increase in the market value of the Blue Box acquisition up to $120 million.In the current year,Big Box should

Depreciation is the allocation of the cost of the asset over the asset's useful life.

A company uses the units-of-output method of computing depreciation on its fleet of cars.A car that costs $26,000 is expected to have a useful life of 75,000 miles and an expected salvage value of $2,000 at the end of its useful life.The rate for each mile is ___________________.

The sale of a depreciable asset for an amount less than its cost always requires the recognition of a loss in the financial records of the company.