Exam 7: Operating Assets

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 incurred after putting the asset into service which would extend the asset's useful life.

Explain the meaning or significance of the following ratios:

Given below are costs incurred during 2012 and 2013 by a company that follows the policy of decreasing the intangible asset account directly as amortized.Research was conducted to discover a new product and costs of $400,000 in 2012 and $800,000 in 2013 were incurred. After several months, a product was created and a patent secured for a cost of $180,000, effective as of July 1, 2013. The company expects to have increased revenues of $500,000 over the next several years. The patent is expected to be useful for the next 10 years.

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.) 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 -Accumulated depreciation

Fields of Green, a turf farm, purchased equipment at the beginning of 2012 for $175,000. In addition, the company paid $6,000 for delivery of the equipment and $4,000 for set up charges. The equipment has an estimated residual value of $5,000 and an estimated life of 10 years or 50,000 hours of operation. The equipment was operated for 5,200 hours in 2012 and 5,000 hours in 2013.

Describe the process that allocates the costs of the tangible and intangible operating assets to expense.

You have determined that a company uses straight line depreciation. However, the depreciation expense is different than you expected it to be. What could be the reason for this difference?

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 is used in situations where technological advances are rapid.

-Refer to Fireworks City. Using the data for 2013, determine the average age of the company's property, plant, and equipment.

Current accounting standards indicate that the costs of intangible assets with an indefinite life, such as goodwill, should

What impact does materiality have on the determination of how a cost related to a plant asset is reported on the financial statements?

Flag Financial 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 shorter than 10 years, perhaps 5 years. What is the impact on earnings per share and net income of depreciating equipment over 5 years rather than 10 years?

Research and Development costs should be added to the cost of patents.

The accounting life of intangible assets is determined by

When plant assets are purchased in a group, each asset is debited to the respective plant asset account for its fair market value at the time of acquisition.

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.) 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 -Building

Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.) 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 -Land improvements

Fantasy Cruise Lines On January 1, 2013, the company purchased a ship for $1,000,000. It has a 10-year useful life and a residual value of $100,000. The company uses the double-declining-balance method. -Refer to Fantasy Cruise Lines. What is the depreciation expense for the year ended December 31, 2013?

A _________________ is the right to produce or sell a published work.

When plant assets are reported, the current period's depreciation expense is subtracted from the original cost on the balance sheet.