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

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

Mehring Company reported net sales of $270,000, net income of $54,000, beginning total assets of $240,000, and ending total assets of $360,000.What was the company's asset turnover ratio?

Rooney Company incurred $280,000 of research costs in its laboratory to develop a patent granted on January 1, 2011.On July 31, 2011, Rooney paid $42,000 for legal fees in a successful defense of the patent.The total amount debited to Patents through July 31, 2011, should be:

Component depreciation is a method used to ensure that the depreciation rate remains constant from year to year.

Costs incurred to increase the operating efficiency or useful life of a plant asset are referred to as

Depending on whether a company uses the straight-line or declining-balance method, annual depreciation expense varies, but total depreciation is the same.

On January 1, 2011, Chicago Furniture purchases a new delivery truck.The company pays $65,000 for the truck, sales taxes of $3,400, and delivery costs of $1,700.Chicago Furniture pays a local vendor $3,600 to paint the company's name and logo on the side of the truck.The company also pays $12,000 for an annual insurance policy and $1,300 for a motor vehicle license.At what amount will Chicago Furniture record the truck on its statement of financial position a t January1, 2011?

A company purchased factory equipment for ¥350,000.It is estimated that the equipment will have a ¥35,000 residual value at the end of its estimated 5-year useful life.If the company uses the double-declining-balance method of depreciation, the amount of annual depreciation recorded for the second year after purchase would be

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Recording depreciation each period is necessary in accordance with the

Farr Company purchased a new van for floral deliveries on January 1, 2011.The van cost €40,000 with an estimated life of 5 years and €10,000 residual value at the end of its useful life.The double-declining-balance method of depreciation will be used.What is the balance of the Accumulated Depreciation account at the end of 2012?

Nicklaus Company has decided to sell one of its old machines on June 30, 2011.The machine was purchased for $120,000 on January 1, 2007, and was depreciated on a straight-line basis for 10 years with no residual value.If the machine was sold for $39,000, what was the amount of the gain or loss recorded at the time of the sale?

Once cost is established for a plant asset, it becomes the basis of accounting for the asset unless the asset appreciates in value, in which case, fair value becomes the basis for accountability.

Costs incurred in the development phase after technological feasibility has been achieved are expensed as incurred.

Depreciation

On January 1, 2011, Chicago Furniture purchased a new delivery truck.The truck is expected to be driven a total of 130,000 miles during its useful life of 4 years; however, Chicago Furniture expects that 2012 and 2013 will be the years the truck is most frequently used for deliveries.If Chicago Furniture wants to achieve the best matching of expenses with revenues, which IFRS acceptable deprecation method should it select?

All of the following intangible assets are amortized except

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

The declining-balance method of depreciation is called an accelerated depreciation method because it depreciates an asset in a shorter period of time than the asset's useful life.

Touch Tronix Company has a piece of manufacturing equipment that has become obsolete.On December 21, 2011, the company discards the equipment which has a historical cost of $500,000 and accumulated depreciation of $460,000.What is the net impact on the long-term assets of Touch Tronix Company on its December 31, 2011 statement of financial position?