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Exam 18: Property, Plant, and Equipment

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Question 21

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

A) True
B) False

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Question 22

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Land purchased for a future building site or as an investment would not be shown in the Property, Plant, and Equipment section of the balance sheet.

A) True
B) False

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Question 23

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ASB Ceramics purchased equipment used in the business three years ago for $32,000. The accumulated depreciation account related to the equipment asset account had a balance of $15,000. The equipment had an estimated salvage (residual) value of $2,000 and had an estimated life of six years. A full year's depreciation was taken the first year. ASB 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 $13,000. Record the appropriate entries necessary.

On January 2, 2013, the Unit Manufacturing Company purchased manufacturing equipment for $62,000. The equipment is expected to have a useful life of six years and a salvage value of $2,000. Prepare a schedule showing the annual depreciation for each of the first three years of the asset's life under the straight-line method, the double-declining-balance method, and the sum-of-the-years'-digits method.

The amount of a long-term asset's impairment is

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

Which of the following abides by the principle of conservatism regarding trade-ins?

Patents and copyrights are intangible assets.

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.

DJG Corporation purchased land in order to build new corporate headquarters for a purchase price of $758,000. The lawyers charged $2,500 to handle the legal aspects of the purchase. Closing costs paid by DJG amounted to $15,160. There was an old factory and warehouse on the property that cost DJG $7,500 to have removed. In addition, CSB Construction charged the corporation $1,800 to grade the property to ensure proper drainage and an additional $15,800 build a drive, parking lot, and walkways. What amount should be recorded as land? What other account(s) should be increased and for what amount(s)?

Modern Products Company purchased new packaging equipment for $245,000 on January 1, 2013. The equipment is expected to be used for 6 years, or 60,000 operating hours. It has an estimated salvage value of $5,000. The equipment was used for 10,000 hours in 2013, 15,000 hours in 2014, and 12,000 hours in 2015. Compute annual depreciation expense for the first three years, using the straight-line method, the double-declining balance method, and the units of output method. $\begin{array} { | c | c | c | c | } \hline & \text { Straight-Line } & \begin{array} { c } \text { Double- } \\\text { Declining } \\\text { Balance }\end{array} & \begin{array} { c } \text { Units of } \\\text { Output }\end{array} \\\hline & \text { Method } & \text { Method } & \text { Method } \\\hline 2013 & & & \\\hline 2014 & & & \\\hline 2015 & & & \\\hline & & & \\\hline\end{array}$

A firm purchases an asset for $50,000 and estimates that it will have a useful life of five years and a salvage value of $5,000. Under the straight-line method, the depreciation expense for the first year of the asset's useful life is

Each year intangibles are assessed to estimate the value which is compared to the existing book value in order to determine if impairment must be recorded.

Modern Products Company purchased new packaging equipment for $245,000 on January 1, 2013. The equipment is expected to be used for 6 years, or 60,000 operating hours. It has an estimated salvage value of $5,000. The equipment was used for 10,000 hours in 2013, 15,000 hours in 2014, and 12,000 hours in 2015. Compute annual depreciation expense for the first three years, using the straight-line method, the double-declining balance method, and the units of output method. $\begin{array} { | c | c | c | c | } \hline & \text { Straight-Line } & \begin{array} { c } \text { Double- } \\\text { Declining } \\\text { Balance }\end{array} & \begin{array} { c } \text { Units of } \\\text { Output }\end{array} \\\hline & \text { Method } & \text { Method } & \text { Method } \\\hline 2013 & & & \\\hline 2014 & & & \\\hline 2015 & & & \\\hline & & & \\\hline\end{array}$

Explain MACRS by creating a list of its characteristics. Include the type of depreciation method it is, when it is required, how property is classified, etc.

An asset that cost $25,000 was sold for $9,000 cash. Accumulated depreciation on the asset was $16,000. The entry to record this transaction includes the recognition of

The method of depreciation that results in the same amount of depreciation expense each year is the

In 2013 Lucky Mining Company paid $800,000 for mining rights. It is estimated that a total of 400,000 kilograms of ore are available to be extracted. During 2013, 60,000 tons of ore were mined. What is the amount of Depletion Expense recorded in the adjusting entry for 2013?

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

On January 2, 2013, the Hanover Company purchased some office equipment for $20,000. The equipment is expected to have a useful life of five years and a salvage value of $2,000. Prepare a schedule showing the annual depreciation for each of the first three years of the asset's life under the straight-line method, the double-declining-balance method, and the sum-of-the-years'-digits method.