Exam 10: Plant Assets, Natural Resoures, and Intangibles

Victory Company purchases office equipment at the beginning of the year at a cost of $15,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 7 years with a $1,000 salvage value. The book value at the end of 7 years is:

A loss on disposal of a plant asset occurs if the cash proceeds received from the asset sale is less than the asset's book value.

Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. What would be the depreciation expense for the first year of its useful life using the double-declining-balance method?

Peavey Enterprises purchased a depreciable asset for $22,000 on April 1, Year 1. The asset will be depreciated using the straight-line method over its four-year useful life. Assuming the asset's salvage value is $2,000, Peavey Enterprises should recognize depreciation expense in Year 2 in the amount of:

What is depreciation of plant assets? What are the factors necessary in computing depreciation?

Since goodwill is an intangible asset, it is amortized each year using the straight-line method.

Asset turnover is computed by dividing net sales by average total assets.

A company purchased a tract of land for its natural resources at a cost of $1,500,000. It expects to mine 2,000,000 tons of ore from this land. The salvage value of the land is expected to be $250,000. The depletion expense per ton of ore is:

Phoenix Agency leases office space for $7,000 per month. On January 3, Phoenix incurs $65,000 to improve the leased office space. These improvements are expected to yield benefits for 8 years. Phoenix has 5 years remaining on its lease. Compute the amount of expense that should be recorded the first year related to the improvements.

Total asset turnover is calculated by dividing average total assets by net sales.

Granite Company purchased a machine costing $120,000, terms 1/10, n/30. The machine was shipped FOB shipping point and freight charges were $2,000. The machine requires special mounting and wiring connections costing $10,000. When installing the machine, $1,300 in damages occurred. Compute the cost recorded for this machine assuming Granite paid within the discount period.

Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000. The machine's useful life is estimated to be 5 years, or 300,000 units of product, with a $15,000 salvage value. During its first year, the machine produces 64,500 units of product. What journal entry would be needed to record the machines' first year depreciation under the units-of-production method?

Bering Rock acquires a granite quarry at a cost of $590,000, which is estimated to contain 200,000 tons of granite and is expected to take 6 years to remove. Compute the depletion expense for the first year assuming 38,000 tons were removed and sold.

Salvage value is:

Martin Company purchases a machine at the beginning of the year at a cost of $60,000. The machine is depreciated using the double-declining-balance method. The machine's useful life is estimated to be 4 years with a $5,000 salvage value. Depreciation expense in year 4 is:

Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000. The machine's useful life is estimated to be 5 years, or 300,000 units of product, with a $15,000 salvage value. During its first year, the machine produces 64,500 units of product. Determine the machines' first year depreciation under the double-declining-balance method.

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the double-declining-balance method. The machine's useful life is estimated to be 5 years with a $4,000 salvage value. Depreciation expense in year 2 is:

Describe the accounting for natural resources, including their acquisition, cost allocation, and account titles.

Peavey Enterprises purchased a depreciable asset for $22,000 on April 1, Year 1. The asset will be depreciated using the straight-line method over its four-year useful life. Assuming the asset's salvage value is $2,000, what will be the amount of accumulated depreciation on this asset on December 31, Year 3?

A company purchased a tract of land for its natural resources at a cost of $1,500,000. It expects to mine 2,000,000 tons of ore from this land. The salvage value of the land is expected to be $250,000. If 150,000 tons of ore are mined during the first year, the journal entry to record the depletion is: