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

Foley Word Processing Service uses the straight-line method of depreciation. The company's fiscal year end is December 31. The following transactions and events occurred during the first three years. 2017 July 1 Purchased a computer from the Computer Center for $1,900 cash plus sales tax of $150, and shipping costs of $50. Nov. 3 Incurred ordinary repairs on computer of $140. Dec. 31 Recorded 2017 depreciation on the basis of a four year life and estimated salvage value of $500. 2018 Dec. 31 Recorded 2018 depreciation. 2019 Jan. 1 Paid $300 for an upgrade of the computer. This expenditure is expected to increase the operating efficiency and capacity of the computer. Instructions Prepare the necessary entries. (Show computations.)

The cost of demolishing an old building on land that has been acquired so that a new building can be constructed should be charged to the ______________ account.

Ordinary repairs are expenditures to maintain the operating efficiency of a plant asset and are referred to as

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

The cost of successfully defending a patent in an infringement suit should be

The depreciation method that applies a constant percentage to depreciable cost in calculating depreciation is

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

When vacant land is acquired, expenditures for clearing, draining, filling, and grading should be charged to the ______________ account.

The amortization period for a patent cannot exceed

A plant asset cost $90,000 when it was purchased on January 1, 2011. It was depreciated by the straight-line method based on a 9-year life with no salvage value. On June 30, 2018, the asset was discarded with no cash proceeds. What gain or loss should be recognized on the retirement?

Powell's Courier Service recorded a loss of $9,000 when it sold a van that originally cost $84,000 for $15,000. Accumulated depreciation on the van must have been

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.

A plant asset must be fully depreciated before it can be removed from the books.

If a fully depreciated plant asset is still used by a company, the

A company purchased land for $90,000 cash. Real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Under the historical cost principle, the cost of land would be recorded at

When an asset is purchased during the year, it is not necessary to record depreciation expense in the first year under the declining-balance depreciation method.

When purchasing delivery equipment, sales taxes and motor vehicle licenses should be charged to Delivery Equipment.

Natural resources are generally shown on the balance sheet under

Salem Company hired Kirk Construction to construct an office building for £6,400,000 on land costing £1,600,000, which Salem Company owned. The building was complete and ready to be used on January 1, 2018 and it has a useful life of 40 years. The price of the building included land improvements costing £480,000 and personal property costing £600,000. The useful lives of the land improvements and the personal property are 10 years and 5 years, respectively. Salem Company uses component depreciation, and the company uses straight-line depreciation for other similar assets. What is the net amount reported for the building on Salem Company's December 31, 2018 statement of financial position?

The book value of an asset will equal its fair market value at the date of sale if