Exam 7: Operating Assets

Match these terms with their correct definition. a.Franchise e.Organizational costs b.Intangible operating assets f.Property, plant, and equipment c.Natural resources g.Trademark d.Operating assets h.Voluntary disposal -Include costs such as legal fees, stock issue costs, accounting and promotional fees

A company should choose a depreciation method that

Explain how the costs associated with operating assets are reported on the balance sheet.

Acquisition cost includes all of the costs that are normal and necessary to acquire and maintain a plant asset over its useful life.

Select the account to which each of the following costs would be debited. (Choices may be used more than once.) a.Land b.Land Improvements c.Buildings d.Machinery and Equipment e.An Expense Account -The sales taxes paid related to a machine purchased.

-Refer to Fabulous Creations. Determine the book value of the company's property, plant and equipment at December 31, 2013 and 2012. What types of transaction(s)could have caused the change in book value of property, plant, and equipment during 2013?

MATCHING For each of the following items, indicate whether each would be treated as capital expenditure or revenue expenditure. (Choices may be used more than once.) a. capital expenditure b. revenue expenditure -Costs related to acquiring an asset, such as sales or excise taxes, transportation, insurance during shipment.

Generally accepted accounting principles (GAAP)require that research and development costs to develop a new product be

Flossil Fossils Company purchased a tract of land containing coal in 2013 for $20,000,000 and then spent $30,000,000 to get a mine ready for operation. The company estimates that there will be 10,000,000 tons of coal available over the next 10 years. The land has a residual value of $500,000. During 2013, 1,000,000 tons of coal were mined.

Given below are several accounts and balances: A)Prepare the property plant and equipment section of the balance sheet at December 31, 2013 in the space provided below. B)By how much will net income increase or decrease during 2013 as a result of the above information?

Select the account to which each of the following costs would be debited. (Choices may be used more than once.) a.Land b.Land Improvements c.Buildings d.Machinery and Equipment e.An Expense Account -The costs to pave a parking lot.

Focal Point Engineering purchased a trademark at the beginning of 2013 for $200,000. Although the trademark's legal life is 20 years, economic benefits were expected for only 10 years. Also, during 2013, the company incurred research and development costs of $200,000. The book value of the trademarks at December 31, 2013, is

Equipment with an estimated residual value at acquisition of $15,000 was sold on December 31, 2013, for $20,000 cash. The following data were available at the time of sale: When this transaction is recorded, it should include a

Many companies use MACRS (Modified Accelerated Cost Recovery System)depreciation for

A company purchased a building for $900,000 on January 1, 2013. The building is being depreciated over 40 years with an estimated residual value of $100,000. What will be the book value of the building in 10 years?

Which of the following is not a reason to revise the amount of depreciation expense?

Below are several accounts and balances from the 2013 financial statements for Fripp, Inc. Prepare the intangible asset section of the company's balance sheet, as well as a partial income statement in the space provided below using the accounts provided.

One reason management may choose the straight-line method of depreciation is because it is easy to compute.

Match the items and explain how each item should be accounted for. (Choices may be used more than once.) a.This item should be included as part of the cost of the equipment.b.This item should be considered a revenue expenditure. -The company purchased a three-year liability insurance policy to cover possible damage caused by the new equipment at a cost of $6,000.

Match these terms with their correct definition. a.Franchise e.Organizational costs b.Intangible operating assets f.Property, plant, and equipment c.Natural resources g.Trademark d.Operating assets h.Voluntary disposal -Tangible operating assets used in the normal operations of a business