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

Why is depreciation added to net income in the Operating Activities category of the statement of cash flows when the indirect method is used?

Which of the following items is added to net income to determine cash flows from operating activities when the indirect method is used to prepare the Operating Activities category of the statement of cash flows?

Florence, Inc.purchased equipment at the beginning of 2016 for $140,000.The company decided to depreciate the equipment over a 10-year period using the double-declining-balance method.The company estimated the equipment's salvage value at $12,000.Show how the costs should be presented on Florence's financial statements at December 31, 2017.Label the statements properly.

_________________________ depreciation is the GAAP depreciation method used most frequently.

Wexford Co.purchased a new delivery truck at the beginning of 2016.The truck has a cost of $37,000, an estimated life of 5 years, and an estimated residual value of $7,000.A full year's depreciation expense is to be recorded in 2016.The truck was driven 20,000 miles during 2016 and 24,000 miles during 2017.The number of expected miles over five years is 100,000. ​ -Refer to information for Wexford Co. ​ By what amount would double-declining-balance depreciation exceed straight-line depreciation over the 5-year life of the truck?

On January 1, 2016, Grove City Corp.purchased a ship for $2,000,000.It has a ten-year useful life and a residual value of $50,000.The company uses the double-declining-balance method. ​ -What was the depreciation expense for Grove City Corp.for the year ended December 31, 2017?

Harkin Company purchased a building on a tract of land and allocated the entire cost of the purchase to building.Normally it depreciates buildings over 20 years using the straight-line method with zero residual value and does not depreciate land.Because of its accounting treatment of the purchase, Harkin's income before taxes for the next 20 years will be

Use the information presented below for Chambersburg Corp.for 2017 and 2016 to answer the questions that follow.Chambersburg uses the straight-line depreciation method. Property, plant, and equipment \ 250,000 \ 190,000 Accumulated depreciation 100,000 85,000 Depreciation expense 62,500 47,500 Net sales 1,000,000 900,000 Average Total assets 625,000 475,000 ​ -Refer to the information for Chambersburg Corp. ? Using the 2017 data, what is the average life of Chambersburg's property, plant, and equipment (rounded to one decimal place)?

Ramirez Stores purchased a trademark at the beginning of 2016 for $340,000.Economic benefits were expected for 10 years, but the trademark's legal life was 20 years.Also, during 2016, Ramirez incurred research and development costs of $200,000.The book value of the trademarks at December 31, 2016, is

Use the information presented below for Chambersburg Corp.for 2017 and 2016 to answer the questions that follow.Chambersburg uses the straight-line depreciation method. Property, plant, and equipment \ 250,000 \ 190,000 Accumulated depreciation 100,000 85,000 Depreciation expense 62,500 47,500 Net sales 1,000,000 900,000 Average Total assets 625,000 475,000 ​ -Refer to the information for Chambersburg Corp. ? Using the 2017 data, what is the average age of Chambersburg's property, plant, and equipment?

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.

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.

Which of the following factors is not related to the decline in the usefulness of plant and equipment assets, and therefore does not need to be considered in selecting an appropriate depreciation method?

The two items that must be estimated with respect to a plant asset in order to properly allocate cost to the affected accounting periods are ______________________________ and ______________________________.

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

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

Acquisition cost is also referred to as: ________________.

Mclaren Corp incurred the following costs to acquire and prepare land during 2016 for a new parking lot: purchase price for land, $800,000; cost to clear the land, $30,000; cost of paving, $40,000; and lighting for the parking lot, $20,000.How much should Halifax record in the Land Improvements account?

Interest is capitalized on all purchased assets.

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. -It was necessary for an architect to redesign the work space to accommodate the new equipment.A fee of $6,000 was paid.