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

International accounting standards require companies to revalue their property, plant, and equipment to reflect fair market values.

The accounting life of intangible assets is determined by

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 easiest to use.

The income statement of Hope Market, Inc. reported a gain from the sale of land. How are the cash flow effects of this transaction reported on the statement of cash flows if the direct method is used to prepare the Operating Activities category?

Select the financial statement on which the user would most likely find the answer to the question given. Select all that apply. -Select the financial statement on which the user would most likely find the answer to the question given. Select all that apply. Did the company sell any property, plant, and equipment during the year at a gain or loss? Focus on just the gain or loss

Captain Lewis, Inc. purchased equipment at the beginning of 2014 for $60,000. In addition, Captain Lewis' paid $2,000 for delivery of the equipment to its plant and $1,000 for installation of the equipment. The equipment has an estimated residual value of $7,000 and an estimated life of 7 years or 70,000 hours of operation. Captain Lewis' is looking at alternative depreciation methods for the equipment. Calculate the following: A. The depreciation expense for the year 2014 using the straight-line depreciation method. B. The total accumulated depreciation at December 31, 2015, using the units-of-production depreciation method. Assume that the equipment is operated for 15,000 hours in 2014 and 12,000 hours in 2015. C. The book value of the equipment at December 31, 2014, using the double-declining-balance depreciation method. D. Which of the above methods is considered accelerated? E. What are the advantages of using an accelerated depreciation method as compared to the straight-line method for lowering taxes early in the life of the equipment?

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

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 for Norwood, Inc, Based on this information, what method of depreciation will produce the maximum depreciation expense in 2016?

Boston Corp. purchased equipment with a cost of $70,000 at the beginning of 2015. The equipment has an estimated life of 25 years or 25,000 units of product. The estimated residual value is $7,500. During 2015, 1,100 units of product were produced with this machinery. Determine the following: A. Amount of total accumulated depreciation at December 31, 2015, using units-of-production depreciation B. Book value at the end of 2015 using straight-line depreciation C. Why would the company choose units-of-production depreciation instead of straight-line?

Use the information presented below for Farley River, Inc. for 2015 and 2014 to answer the questions that follow. Farley River uses the straight-line depreciation method. -Refer to the information for Farley River, Inc. What is the asset turnover ratio for Farley River for 2015?

Hawk Company purchased an asset on January 1, 2014, for $10,000. The asset was expected to have a ten-year life and a $1,000 salvage value. The company uses the straight-line method of depreciation. On January 1, 2016, the company made a major repair to the asset of $5,000, extending its life. The asset is expected to last ten years from January 1, 2016. Calculate the amount of depreciation for 2016.

Explain the meaning or significance of the following ratios: A. Average life of property, plant, and equipment B. Average age of property, plant, and equipment A. The average life indicates how many years of useful life the company expects from the asset.

All intangible assets should be amortized.

Use the information presented below for Farley River, Inc. for 2015 and 2014 to answer the questions that follow. Farley River uses the straight-line depreciation method. -Refer to the information for Farley River Inc. Using the 2015 data, what is the average age of Farley River's property, plant, and equipment?

Assume that Alabama Company purchased factory equipment on January 1, 2015, for $75,000. The equipment has an estimated life of five years and an estimated residual value of $6,000. Alabama's accountant is considering whether to use the straight-line or the units-of-production method to depreciate the asset. Because the company is beginning a new production process, the equipment will be used to produce 5,000 units in 2015, but production subsequent to 2015 will increase by 5,000 units each year. REQUIRED: Calculate the depreciation expense, accumulated depreciation, and book value of the equipment under both methods for each of the five years of its life. Would the units-of production method yield reasonable results in this situation? Explain.

GAAP require that research and development costs to develop a new product be

Given below is a list of items that may be reported on a statement of cash flows. Identify each as one of the following using the indirect method: -Cost incurred to acquire a patent

All of the following are included in the acquisition cost of property, plant, and equipment except:

What is the relationship between the depreciation method chosen and income taxes paid in the early years? Explain.

When plant assets are purchased in a group, each asset increases the respective plant asset account for its fair market value at the time of acquisition.