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

Exeter Corporation purchased a piece of equipment with a price of $80,000 on March 1, 2018.The amounts below are related to the equipment purchase.Match the items below and explain why each revenue expenditure is not capitalized. -A state agency required that a pollution-control device be installed on the equipment at a cost of $5,000.

Acquisition costs are also known as replacement costs.

Creighton, Inc.determined that it had incorrectly estimated both the useful life and the estimated residual value of equipment which it purchased 2 years ago.When accounting for the change in its accounting estimates, Creighton must

On December 1, 2016, Xeon Company bought land and an accompanying warehouse from Yen Company for $800,000.The fair market values of the land and the building at the time of purchase were $700,000 and $300,000, respectively.How much of the purchase price should Xeon Company allocate to the land and how much should be allocated to the building?

Asset turnover is calculated as Net income divided by Average Total Assets.

Goodwill can be recorded as an asset when a(n)

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: -Proceeds from the sale of a building

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

Delmont Fire Co.purchased identical equipment having an estimated useful life of ten years.Wind Chime uses the straight-line depreciation method and Fire Hut uses the double-declining-balance method of depreciation.Assuming the two entities are similar in all other respects, which of the following statements is correct?

For each of the following sentences , select the word or group of words that best completes the statement. -____________________________________ is (are) the expenditure(s) incurred in the discovery of new knowledge and the translation of research into a design or plan for a new product.

Fulsom Co.began construction of a new factory at the beginning of 2016.At the end of the year, construction was completed, and construction costs totaled $200,000.Fulsom borrowed $180,000 at the beginning of 2016 to finance the construction and repaid the loan at the end of 2016.The interest rate on the loan was 9%.Determine the following amounts. A. The actual interest incurred on the construction loan during 2016 . B. The interest to be capitalized for 2016 . C. The total cost of the factory reported on the balance sheet. D. What impact does capitalizing interest have on net income for 2016 ? Explain.

Pocono Co.purchased a patent at the beginning of 2016 for $490,000 Economic benefits were expected for 7 years, but the patent's legal life was 20 years.Also during 2016, the company incurred research and development costs of $150,000.Patent amortization expense for 2016 is

Select where the following accounts would be reported on Coca-Cola's financial statements.(Select all that apply.) -Gain on sale of plant asset a. Balance Sheet-Property, Plant, and Equipment b. Balance Sheet-Intangible Assets c. Balance Sheet-Current Assets d. Balance Sheet-Other Assets e. Income Statement-Operating Section f. Income Statement-Other Revenue and Expense Section g. Statement of Cash Flows

In 2012, Blanton Company bought equipment with a cost of $160,000, an estimated residual value of $40,000, and an estimated life of 15 years.It was depreciated by the straight-line method for 4 years.Due to obsolescence, it was determined at the beginning of 2016 that the useful life should be shortened by 3 years and the residual value changed to zero.The depreciation expense for 2016 is

Net income on a cash basis is arrived at by adding depreciation and amortization back to accrual net income.

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?

Interest is never a part of the cost of property, plant, and equipment or intangible assets.

Royal Company purchased a dump truck at the beginning of 2014 at a cost of $60,000.The truck had an estimated life of 6 years and an estimated residual value of $24,000.On January 1, 2016, the company made major repairs of $20,000 to the truck that extended the life 1 year.Thus, starting with 2016, the truck has a remaining life of 5 years and a new salvage value of $8,000.Royal uses the straight-line depreciation method.When calculating depreciation for 2016, Royal should

Because plant and equipment are reported as long-term assets on the balance sheet, they have no impact on net income for the period until they are sold.

Identify where each of the following accounts would be reported on Coca-Cola's financial statements. -Accumulated amortization