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

Which one of the following items is not a consideration when recording periodic depreciation expense on plant assets?

During 2011, Rathke Corporation reported net sales of $2,500,000, net income of $1,200,000, and depreciation expense of $100,000.Rathke also reported beginning total assets of $1,000,000, ending total assets of $1,500,000, plant assets of $800,000, and accumulated depreciation of $500,000.Rathke's asset turnover ratio is

When plant assets are exchanged, the cost of the new asset is the book value of the old asset plus any cash paid.

Intangible assets are the rights and privileges that result from ownership of long-lived assets that

On May 1, 2011, Pinkley Company sells office furniture for €90,000 cash.The office furniture originally cost €225,000 when purchased on January 1, 2004.Depreciation is recorded by the straight-line method over 10 years with a residual value of €22,500.What gain should be recognized on the sale?

The asset turnover ratio

The Accumulated Depreciation account represents a cash fund available to replace plant assets.

The book value of an asset is equal to the

Land is reported on the statement of financial position at its cost less accumulated depletion, or at its fair value, whichever is higher.

Accountants do not attempt to measure the change in a plant asset's fair value during ownership because

Eckman Company purchased equipment for $40,000 on January 1, 2010, and will use the double-declining-balance method of depreciation.It is estimated that the equipment will have a 5-year life and a $2,000 residual value at the end of its useful life.The amount of depreciation expense recognized in the year 2012 will be

A loss on disposal of a plant asset as a result of a sale or a retirement is calculated in the same way.

Units-of-activity is an appropriate depreciation method to use when

Component depreciation is the method of depreciation recommended for an asset that is expected to be significantly more productive in the first half of its useful life.

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Which of the following methods of computing depreciation is production based?

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

Equipment was purchased for $90,000.Freight charges amounted to $4,200 and there was a cost of $12,000 for building a foundation and installing the equipment.It is estimated that the equipment will have a $18,000 residual value at the end of its 5-year useful life.Depreciation expense each year using the straight-line method will be

The asset turnover ratio is calculated as total sales divided by ending total assets.

Santayana Company purchased a machine on January 1, 2009, for $8,000 with an estimated residual value of $2,000 and an estimated useful life of 8 years.On January 1, 2011, Santayana decides the machine will last 12 years from the date of purchase.The residual value is still estimated at $2,000.Using the straight-line method, the new annual depreciation will be