Exam 7: Operating Assets

Match these terms with their correct definition. a.Book value e.Depreciation b.Cost f.Impairment c.Depletion g.Involuntary disposal d.Depreciable cost h.Residual value -Cost less residual value

A company wants to minimize the amount of time and effort its bookkeepers spend on calculating depreciation. Since the company has not been profitable, taxes are not an issue, but maximizing the profit and minimizing reported losses are major objectives. Recommend a course of action for this company and provide support for your recommendation.

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 -Right to exclusive use of a distinctive name, phrase, or symbol

Given the following list of methods of depreciation, select the method that is best for the situation or purpose given. (Choices may be used more than once.) a.Straight-line b.Units-of-production c.Double-declining-balance d.MACRS -This method maximizes net income.

In 2013, Fisher Apartments purchased an apartment building to rent to university students. It cost the company $250 to repair damage done by a tenant to one of its units. How should this cost be recorded?

Explain what costs are included in the acquisition cost of operating assets.

On the balance sheet, the cumulative amount of plant and equipment already expensed is reported in an account called

If a company is concerned about minimizing its income tax burden, it would use the straight-line depreciation method to accomplish this objective.

Distinguish between capital and revenue expenditures.

An impairment is a temporary decline in the future benefit or service potential of an asset.

____________ costs are expenditures incurred in the discovery of new knowledge and the translation of research into a design or plan for a new product.

An oil company purchased 10,000 acres of land on January 1, 2011, for $5,000,000, on which it developed an underground oil site. The company spent $11,000,000 to prepare the site for operation but believes that 500,000 barrels of oil can be extracted from the site over 5 years after drilling begins. The land has a residual value of $250,000. Assuming 50,000 barrels of oil were extracted from the land in 2013, how much depletion would be recorded?

On the balance sheet, a company reports plant assets by subtracting residual value from the original cost of the plant asset.

Refer to Falling Leaves Lawn Care. The company is comparing the straight-line and double-declining-balance depreciation methods. Of these two methods, which method creates the larger expense and larger tax savings in 2013?

Assets classified as property, plant, and equipment are reported at

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 paid to clear land.

Company A has equipment that cost $5,250,000 which has accumulated depreciation of $500,000 while Company B has equipment that costs $4,600,000 and has accumulated depreciation of $4,400,000. Assuming both companies use straight line depreciation and estimated useful lives of 40 years with $100,000 residual values, which of the following statements is true?

How should intangible assets be disclosed on the balance sheet?

When making lending decisions, lenders generally are not interested in the company's operating assets.

A company sold equipment at a loss. What is the impact on the balance sheet of removing the equipment account and its related accumulated depreciation account?