Exam 8: Reporting and Interpreting Property,plant,and Equipment;intangibles;and Natural Resources

Which of the following does not properly describe the depreciation process?

Under what conditions would a company most likely adopt the double-declining-balance method for financial reporting?

Gains and losses on disposal of a long-lived asset are determined by comparing the asset's cost to its book value.

Lincoln Restaurants reported net income in 2019 of $45.9 million and depreciation expense of $48.8 million.It also reported additions to property and equipment of $162.9 million.Using the indirect method of preparing the statement of cash flows,how will these items impact the 2019 statement of cash flows?

Which of the following statements is incorrect?

During 2019,a company purchased a mine at a cost of $3,000,000.The company spent an additional $600,000 getting the mine ready for its intended use.It is estimated that 300,000 tons of mineral can be removed from the mine and the residual value of the mine will be $600,000.During 2019,45,000 tons of mineral were removed from the mine and 35,000 tons were sold. Which of the following statements is correct with respect to the accounting for the mine?

Amanda Company purchased a computer that cost $10,000.It had an estimated useful life of five years and a residual value of $1,000.The computer was depreciated by the straight-line method and was sold at the end of the third year of use for $5,000 cash. How much of a gain or loss should Amanda record?

Smith Company exchanges assets to acquire a building.The market price of the Smith stock on the exchange date was $35 per share and the building's book value on the books of the seller was $250,000. Which of the following is correct for Smith Company when Smith issues 10,000 shares of $10 par value common stock and pays $20,000 cash in exchange for the building?

Which of the following is true when a company constructs an asset for its own use?

Williams Company purchased a machine costing $25,000 and is depreciating it over a 10-year estimated useful life with a residual value of $3,000.At the beginning of the eighth year,a major overhaul on it was completed at a cost of $8,000,and the total estimated useful life was changed to 12 years with the residual value unchanged.How much is the year 8 depreciation expense assuming use of the straight-line depreciation method?

Spa Sources Corporation purchased a machine that had an original cost of $60,000 and an estimated residual value of $10,000.The useful life was expected to be 8 years and straight-line depreciation is used.At the end of 2019,the book value of the machine was $35,000.Spa Sources sold the machine for $32,000 cash on October 1,2020. A.Prepare the journal entry to record depreciation for 2020 up to the date of sale. B.Prepare the journal entry to record the sale of the machine.

The first step in recording the disposal of a long-lived asset is to update its book value by recognizing depreciation expense for the period of time since the last depreciation adjustment was made.