Exam 9: Property, Plant, and Equipment, Intangible Assets and Natural Resources

Clark Imports sold a depreciable PPE asset for cash of $35,000. The accumulated depreciation amounted to $70,000, and a loss of $5,000 was recognized on the sale. Under these circumstances, the original cost of the asset must have been:

Trade-ins Dietz owned a delivery van with a book value of $20,000. It traded this old van in on a new one which cost $160,000. The dealer allowed Dietz a trade-in allowance of $35,000 on the old van, and Dietz paid the remainder in cash. Compute the following: (a) The amount of cash Dietz must pay to purchase the new van$ $\underline{\quad\quad}$ (b) The gain on disposal of the old van to be reported in Dietz's financial statements$ $\underline{\quad\quad}$ (c) The gain on disposal of the old van to be reported in Dietz 's income tax return$ $\underline{\quad\quad}$

When comparing the units-of-output method of depreciation with straight-line depreciation:

The fair market value of Lewis Company's net identifiable assets is $5,000,000. Martin Corporation purchases Lewis' entire business for $5,800,000. Which of the following statements is not correct?

On 2 April 2013, Victor, Inc. acquired a new piece of filtering equipment. The cost of the equipment was $160,000 with a residual value of $20,000 at the end of its estimated useful lifetime of 4 years. -Refer to the above information. If Victor uses straight-line depreciation with the half-year convention, the book value of the equipment at 31 December 2014 will be:

The basic purpose of the matching principle is to allocate the cost of an asset to expense over the years in which the asset contributes to revenue. Current accounting practice does not strictly apply this principle to expenditures for:

The book value of PPE assets (other than land):

Which of the following would not be considered part of the cost of equipment recently purchased?

Charging an expenditure directly to an expense account is based on the assumption that the benefits of that expenditure have been used up in the current period.

Depreciation; gains and losses in financial statements In 2010, Amalfi, Inc. purchased equipment with an estimated 10-year life for $42,600. The residual value was estimated at $9,900. Amalfi uses straight-line depreciation and applies the half-year convention. On 18 April 2012 Amalfi closed one of its plants and sold this equipment for $33,600. Under these assumptions compute the following for this equipment: (a) Depreciation expense in 2010 underline (b) Depreciation expense in 2011 underline (c) Depreciation expense in 2012 underline (d) Book value at the date of sale in 2012 underline (e) Gain or loss on the sale in 2012 (underline the correct term) underline

When a depreciable asset is sold at a price equal to its book value, a journal entry would include

The term accumulated depreciation, as used in accounting, is best defined as:

U. S. GAAP requires that a company should capitalize goodwill and adjust its value if subject to impairment.

In February 2014, Brilliant Industries purchased the Topaz Mine at a cost of $100,000,000. The mine is estimated to contain 500,000 carats of stone and to have a residual value of $5,000,000 after mining operations are completed. During 2014, 50,000 carats of stone were removed from the mine and sold. In this situation:

Which of the following would not be amortized?

The formula for the double-declining balance method of depreciation is: Remaining book value times the straight line rate is equal to depreciation expense.

Various depreciation methods-first year On 5 September 2013, Apollo purchased equipment costing $40,000, with an estimated life of 6 years and an estimated salvage value of $4,000. Compute the depreciation expense Apollo would recognize on this equipment in 2010 assuming: (a) Straight-line depreciation with fractional periods rounded to the nearest full month underline (b) 200\% -declining-balance, using the half-year convention underline (c) 150\% -declining-balance with fractional periods rounded to the nearest full month underline

Straight-line is the most widely used depreciation method in financial statements, and declining-balance is the most widely used method in federal income tax returns.

On 12 March 2013, Shoreham, Inc. acquired melting equipment for $45,600. The estimated life of the equipment is 6 years, with an estimated residual value of $2,400. -In its financial statements, Shoreham uses double-declining-balance depreciation with half-year convention. The book value of the equipment at 31 December 2014, will be:

In February 2014, Gemstone Industries purchased the Opal Mine at a cost of $20,000,000. The mine is estimated to contain 500,000 carats of stone and to have a residual value of $1,000,000 after mining operations are completed. During 2014, 50,000 carats of stone were removed from the mine and sold. In this situation: