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

For each of the following items, indicate whether each would be treated as a -Costs incurred after putting the asset into service which would extend the asset's useful life

If Grove City Corp.continues to use the ship in its eleventh year, what is the correct accounting procedure?

If a company's asset turnover ratio decreased from 2016 to 2017, which of the following conclusions can be made?

Interest is capitalized when incurred in connection with the construction of plant assets because

Fortune Company has 10 delivery trucks that became fully depreciated in the prior year.Fortune will continue charging the same amount of depreciation as before so that there will be no decrease in expenses.

For each of the following items, indicate whether each would be treated as a -Costs incurred after putting the asset into service which keep the asset in normal operating condition

Norwood, Inc.purchased a crane at a cost of $80,000.The crane has an estimated residual value of $5,000 and an estimated life of 8 years, or 12,500 hours of operation.The crane was purchased on January 1, 2016 and was used 2,700 hours in 2016 and 2,600 hours in 2017. ​ -Refer to the information about Norwood, Inc. ​ If Norwood uses the double-declining-balance depreciation method, what amount is the depreciation expense for 2017?

Birken Co.purchased a building for $600,000 in 2004.At the end of 2016, when it had a book value of $450,000, it was appraised for $1,000,000.A potential buyer offered $900,000.Birken rejected the offer.What amount should is recorded on Birken's records at the end of 2016 in the account called Buildings?

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. -The company financed the equipment purchase with a bank loan.Interest of $3,000 was paid on the loan during 2018.

Select the account that would be increased to show each of the following costs. -The costs paid to clear land

All intangible assets should be amortized.

Barnhill, Inc.uses straight-line depreciation for its equipment with an estimated useful life of 10 years and zero residual value.The CEO points out that the equipment will last much longer than 10 years, perhaps up to 20 years.What is the impact on earnings per share and net income of depreciating equipment over 20 years rather than 10 years?

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.What amount should be recorded as depreciation expense each year starting in 2016?

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. ? What is the asset turnover ratio for Chambersburg for 2017?

Using the straight-line depreciation method will cause a company to incur ____ tax expense in the early years of an asset's life than they would experience using an accelerated method of depreciation.

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. ? Between 2016 and 2017, Chambersburg sold some equipment that had an original cost of $57,500.Which statement is most likely true concerning transactions that must have occurred during the period?

The Property, Plant, and Equipment category includes long-term investments.

Arena, Inc.uses straight-line depreciation for its equipment.Arena purchased equipment for $300,000 and estimated its useful life at 8 years.The bookkeeper failed to consider the residual value of $50,000.What is the impact on earnings per share and operating income of failing to consider the residual value?

Lenders are interested in the value of operating assets as collateral when making lending decisions.

Which of the following costs related to the purchase of production equipment incurred by Newark Company during 2016 would be considered a revenue expenditure?