Exam 8: Operating Assets: Property, Plant, and Equipment, and Intangibles

Select the account that would be increased to show each of the following costs. -The costs to pave a parking lot.

Royal Company purchased a dump truck at the beginning of 2012 at a cost of $60,000. The truck had an estimated life of 6 years and an estimated residual value of $24,000. On January 1, 2014, the company made major repairs of $20,000 to the truck that extended the life 1 year. Thus, starting with 2014, the truck has a remaining life of 5 years and a new salvage value of $8,000. Royal uses the straight-line depreciation method What is the book value of the truck to be reported on the balance sheet at December 31, 2014?

Select the account that would be increased to show each of the following costs. -The interest costs incurred during the construction period of a new building built by a company for its own use.

Gommert Co. purchased land and a building for $425,000. The appraised values of the land and the building were $150,000 and $450,000, respectively. In addition, the attorney was paid $10,000 for handling the closing on the property. A. What amounts will be recorded as the costs of the land and building? B. What is the accounting justification against increasing the land and building accounts for their appraised values?

Select the account that would be increased to show each of the following costs. -The annual painting costs of an office building.

On January 1, 2014, Aaron Simpson bought a farm store of a small competitor for $620,000. An appraiser, hired to assess the acquired assets' value, determined that the land, building, and equipment had market values of $300,000, $215,000, and $270,000, respectively. REQUIRED: 1. What is the acquisition cost of each asset? Identify the effects of the transaction on the accounting equation to record the acquisition rounded to the nearest dollar. 2. Simpson plans to depreciate the building on a straight-line basis for 30 years and the equipment over 16 years . Determine the amount of depreciation expense for 2014 on these newly acquired asset srounded to the nearest dollar. You can assume zero residual value for all assets. 3. How would the assets appear on the balance sheet as of December 31, 2014?

On January 1, 2013, Petersen Corp. sold a piece of equipment for $3,000 which it had used for several years. The equipment had cost $13,000, and its accumulated depreciation amounted to $9,000 at the time of the sale. What are the net effects on the accounting equation of selling the equipment?

depreciation is the GAAP depreciation method considered to be "accelerated" in nature.

Exeter Corporation purchased a piece of equipment with a price of $80,000 on March 1, 2015. The amounts below are related to the equipment purchase. Match the items below and explain why each revenue expenditure is not capitalized. -The company financed the equipment purchase with a bank loan. Interest of $3,000 was paid on the loan during 2015.

Tarkington Beers, Inc. purchased the most popular and well-known pub in a college town. Its purchase price was $1,200,000. The appraisers determined that the land should be valued at $400,000, the building at $500,000 and the equipment at $200,000. Which of the following statements is correct?

A revenue expenditure is deducted from the cost of the asset.

Below are several accounts and balances from the 2015 financial statements for Torrent, Inc. Prepare the intangible asset section of the company's balance sheet, as well as a partial income statement in the space provided below using the accounts provided. BALANCE SHEET INCOME STATEMENT

Using different depreciation methods for book purposes versus tax purposes for the same asset is

Given the following list of methods of depreciation, select the method that is best for the situation or purpose given. Some answers may be used more than once, while others may not be used at all. -This method is the best for management bonus plans.

In 2010, Blanton Company bought equipment with a cost of $160,000, an estimated residual value of $40,000, and an estimated life of 15 years. It was depreciated by the straight-line method for 4 years. Due to obsolescence, it was determined at the beginning of 2014 that the useful life should be shortened by 3 years and the residual value changed to zero. The depreciation expense for 2014 is

One reason management may choose the straight-line method of depreciation is because it is easy to compute.

When constructing assets, capitalized interest is based on

Given the following list of methods of depreciation, select the method that is best for the situation or purpose given. Select all that apply. This method is used in situations where technological advances are rapid.

Glitch Company incurred the following costs during 2014 and 2015: a. Research and development costing $40,000 was conducted on a new product to sell in future years. A product was successfully developed, and a patent for it was granted during 2014. Glitch is unsure of the period benefited by the research, but believes the product will result in increased sales over the next five years. b. Legal costs and application fees of $25,000 for the 20-year patent were incurred on January 1, 2014. c. A patent infringement suit was successfully defended at a cost of $24,000. Assume that all costs were incurred on January 1, 2015. REQUIRED: Determine how the costs in a and b should be presented on Glitch's financial statements as of December 31, 2014. Also determine the amount of amortization of intangible assets that Glitch should record in 2014 and 2015. a. Research and development costing $40,000 was conducted on a new product to sell in future years. A product was successfully developed, and a patent for it was granted during 2014. Glitch is unsure of the period benefited by the research, but believes the product will result in increased sales over the next five years. b. Legal costs and application fees of $25,000 for the 20-year patent were incurred on January 1, 2014. c. A patent infringement suit was successfully defended at a cost of $24,000. Assume that all costs were incurred on January 1, 2015. REQUIRED: Determine how the costs in a and b should be presented on Glitch's financial statements as of December 31,

Royal Company purchased a dump truck at the beginning of 2012 at a cost of $60,000. The truck had an estimated life of 6 years and an estimated residual value of $24,000. On January 1, 2014, the company made major repairs of $20,000 to the truck that extended the life 1 year. Thus, starting with 2014, the truck has a remaining life of 5 years and a new salvage value of $8,000. Royal uses the straight-line depreciation method. What amount should be recorded as depreciation expense each year starting in 2014?