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

Lightning Delivery, Inc. purchased a truck on January 1, 2013, for $30,000. The truck had an estimated life of 5 years and an estimated residual value of $5,000. Lightning Delivery used the straight-line method to depreciate the asset. On July 1, 2015, the truck was sold for $17,000 cash. The journal entry to record the sale of the truck in 2015

Identify where each of the following accounts would be reported on Coca­Cola's financial statements -Accumulated depreciation

Why do many companies use MACRS Modified Accelerated Cost Recovery System depreciation for tax purposes? If a company uses MACRS for depreciation for tax purposes, can it use a different method for financial reporting? Explain why or why not.

Fortune Company has 10 delivery trucks that became fully depreciated in the prior year. Fortune will continue charging the same amount of depreciation as before so that there will be no decrease in expenses.

Arena, Inc. uses straight-line depreciation for its equipment. Arena purchased equipment for $300,000 and estimated its useful life at 8 years. The bookkeeper failed to consider the residual value of $50,000. What is the impact on earnings per share and operating income of failing to consider the residual value?

Norwood, Inc. Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of 8 years, or 12,500 hours of operation. The crane was purchased on January 1, 2015 and was used 2,700 hours in 2015 and 2,600 hours in 2016. -Refer to the information about Norwood, Inc. If Norwood uses the double-declining-balance depreciation method, what amount is the depreciation expense for 2016?

Assume that Halpern Company purchased an asset on January 1, 2014, for $122,800. The asset had an estimated life of six years and an estimated residual value of $2,200. The company used the straight-line method to depreciate the asset. Assume that Halpern Company sold the asset on July 1, 2015, and received $96,000 cash and a note for an additional $22,000. REQUIRED: 1. Identify the effects on the accounting equation of the transactions to record depreciation for 2015 and all transactions necessary for the sale of the asset. 2. How should the gain or loss on the sale of the asset be presented on the income statement?

Select the financial statement on which the user would most likely find the answer to the question given. Select all that apply. -How much depreciation expense did the company report during the year?

Which statement is true concerning operating assets?

On the balance sheet, a company reports plant assets by subtracting residual value from the original cost of the plant asset.

Paulson Transport Company On January 1, 2015, Paulson Transport Company purchased a ship for $2,000,000. It has a ten-year useful life and a residual value of $50,000. The company uses the double-declining-balance method. -What was the depreciation expense for Paulson Transport for the year ended December 31, 2016?

A company begins construction of an asset on January 1, 2014, and completes construction on December 1, 2014. The company pays the following amounts related to construction: January 1: $1,000,000 July 1: $2,000,000 October 1: $1,000,000 Calculate the average accumulated expenditures for the purpose of capitalizing interest.

Borden Company incurred the following costs to acquire and prepare land for a new parking lot: purchase price for land, cost to clear the land, cost of paving, lighting for the parking lot, and landscaping for the parking lot. How should the company determine which costs should be recorded as Land Improvements and which cost should be recorded as Land?

Acquisition cost is also known as historical cost with respect to property plant and equipment.

Blanket Airlines acquires a new aircraft. It has an estimated life of 15 years and should be used for 15,000 hours of flight. What is the most appropriate method of depreciation to properly match revenues and expenses?

A statement of cash flows reports property, plant, and equipment transactions. A. What are the effects of acquisitions of plant assets on the statement of cash flows? B. In which section of the statement of cash flows are cash flows from sales of plant assets reported? C. How is depreciation reported on the statement of cash flows? Why?

Identify where each of the following accounts would be reported on Coca­Cola's financial statements -Total amortization since inception

Explain what costs are included in the acquisition cost of operating assets.

Which of the following costs related to the purchase of production equipment incurred by Newark Company during 2015 would be considered a revenue expenditure?

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. -Early in the life of the asset, this method maximizes net income.