Exam 10: Plant Assets, Natural Resources, and Intangible Assets

Depletion cost per unit is computed by dividing the total cost of a natural resource by the estimated number of units in the resource.

Equipment was acquired on January 1, 2007, at a cost of $80,000. The equipment was originally estimated to have a salvage value of $5,000 and an estimated life of 10 years. Depreciation has been recorded through December 31, 2010, using the straight-line method. On January 1, 2011, the estimated salvage value was revised to $6,000 and the useful life was revised to a total of 8 years. Instructions Determine the Depreciation Expense for 2011.

Indicate whether each of the following expenditures should be classified as land (L), land improvements (LI), buildings (B), equipment (E), or none of these (X). _____ 1. Parking lots _____ 2. Electricity used by a machine _____ 3. Excavation costs _____ 4. Interest on building construction loan _____ 5. Cost of trial runs for machinery _____ 6. Drainage costs _____ 7. Cost to install a machine _____ 8. Fences _____ 9. Unpaid (past) property taxes assumed _____10. Cost of tearing down a building when land and a building on it are purchased

A truck that cost $21,000 and on which $10,000 of accumulated depreciation has been recorded was disposed of for $9,000 cash. The entry to record this event would include a

A company purchased factory equipment on April 1, 2010 for $64,000. It is estimated that the equipment will have an $8,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2010 is

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

Mather Company purchased equipment on January 1, 2010 at a total invoice cost of $224,000; additional costs of $4,000 for freight and $20,000 for installation were incurred. The equipment has an estimated salvage value of $8,000 and an estimated useful life of five years. The amount of accumulated depreciation at December 31, 2011 if the straight-line method of depreciation is used is:

Equipment with a cost of $240,000 has an estimated salvage value of $15,000 and an estimated life of 4 years or 15,000 hours. It is to be depreciated using the units-of-activity method. What is the amount of depreciation for the first full year, during which the equipment was used 3,300 hours?

Depletion expense is reported in the income statement as an operating expense.

Gurney Company sold equipment on July 31, 2010 for $50,000. The equipment had cost $140,000 and had $80,000 of accumulated depreciation as of January 1, 2010. Depreciation for the first 6 months of 2010 was $8,000. Instructions Prepare the journal entry to record the sale of the equipment.

Equipment costing $30,000 with a salvage value of $6,000 and an estimated life of 8 years has been depreciated using the straight-line method for 2 years. Assuming a revised estimated total life of 5 years and no change in the salvage value, the depreciation expense for year 3 would be

The method most commonly used to compute depletion is the

The cost of paving, fencing, and lighting a new company parking lot is charged to a ______________ account.

The declining-balance method of depreciation produces

Research and development costs

An asset was purchased for $150,000. It had an estimated salvage value of $30,000 and an estimated useful life of 10 years. After 5 years of use, the estimated salvage value is revised to $24,000 but the estimated useful life is unchanged. Assuming straight-line depreciation, depreciation expense in year 6 would be

The cost of natural resources is not allocated to expense because the natural resources are replaceable only by an act of nature.

Copyrights are granted by the federal government

DeLong Corporation purchased land adjacent to its plant to improve access for trucks making deliveries. Expenditures incurred in purchasing the land were as follows: purchase price, $50,000; broker's fees, $6,000; title search and other fees, $5,000; demolition of an old building on the property, $5,700; grading, $1,200; digging foundation for the road, $3,000; laying and paving driveway, $25,000; lighting $7,500; signs, $1,500. List the items and amounts that should be included in the Land account.

Eckman Company purchased equipment for $40,000 on January 1, 2009, and will use the double-declining-balance method of depreciation. It is estimated that the equipment will have a 5-year life and a $2,000 salvage value at the end of its useful life. The amount of depreciation expense recognized in the year 2011 will be