Exam 9: Plant Assets, Natural Resources, and Intangible Assets

A factory machine was purchased for $375,000 on January 1, 2015. It was estimated that it would have a $75,000 salvage value at the end of its 5-year useful life. It was also estimated that the machine would be run 40,000 hours in the 5 years. The company ran the machine for 4,000 actual hours in 2015. If the company uses the units-of-activity method of depreciation, the amount of depreciation expense for 2015 would be

The IRS does not require the taxpayer to use the same depreciation method on the tax return that is used in preparing financial statements.

All plant assets (fixed assets) must be depreciated for accounting purposes.

A change in the estimated salvage value of a plant asset requires a restatement of prior years' depreciation.

Additions and improvements to a plant asset that increase the asset's operating efficiency, productive capacity, or expected useful life are generally expensed in the period incurred.

The balances of the major classes of plant assets and accumulated depreciation by major classes should be disclosed in the balance sheet or notes.

A computer company has $2,800,000 in research and development costs. Before accounting for these costs, the net income of the company is $2,000,000. What is the amount of net income or loss after these R & D costs are accounted for?

The fair value of a plant asset is always the same as its book value.

All of the following intangible assets are amortized except

Equipment was purchased for $150,000. Freight charges amounted to $7,000 and there was a cost of $20,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $30,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be

On May 1, 2015, Pinkley Company sells office furniture for $300,000 cash. The office furniture originally cost $750,000 when purchased on January 1, 2008. Depreciation is recorded by the straight-line method over 10 years with a salvage value of $75,000. What gain should be recognized on the sale?

A gain or loss on disposal of a plant asset is determined by comparing the

If a plant asset is sold at a gain, the gain on disposal should reduce the cost of goods sold section of the income statement.

Which of the following statements is not true when a fully depreciated plant asset is retired?

A purchased patent has a legal life of 20 years. It should be

Farr Company purchased a new van for floral deliveries on January 1, 2015. The van cost $56,000 with an estimated life of 5 years and $14,000 salvage value at the end of its useful life. The double-declining-balance method of depreciation will be used. What is the depreciation expense for 2015?

Orr Corporation sold equipment for $30,000. The equipment had an original cost of $90,000 and accumulated depreciation of $45,000. As a result of the sale,

If a plant asset is retired before it is fully depreciated and no salvage value is received,

Which of the following methods of computing depreciation is production based?

Ron's Quik Shop bought machinery for $75,000 on January 1, 2014. Ron estimated the useful life to be 5 years with no salvage value, and the straight-line method of depreciation will be used. On January 1, 2015, Ron decides that the business will use the machinery for a total of 6 years. What is the revised depreciation expense for 2015?