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

Computation of goodwill Chopin Corporation has net assets (total assets minus total liabilities) valued at $880,000 and has earned an average profit of $132,000 per year for the past several years. Sands Company is negotiating the purchase of the company and has agreed to pay an amount equal to the value of the net identifiable assets, assume the liabilities, and pay a sum for goodwill equal to the earnings in excess of 12% on net assets, expected to continue for five years. What is the amount for goodwill Sands is including in its offer? $_______________ Computations

The gain or loss on the disposal of a depreciable asset reported in financial statements often differs from that reported for income tax purposes. The principal reason for the difference is:

Which of the following is not a capital expenditure?

Land is purchased for $256,000. Additional costs include a $15,300 fee to a broker, a survey fee of $2,400, $1,750 to construct a fence and a legal fee of $8,500. What is the cost of the land?

The adjusting entries to record depreciation or amortization expense, or to write down assets that have become impaired:

Coca-Cola's famous name printed in distinctive typeface is an example of:

In the United States, for depreciable property other than real estate, MACRS is based upon:

Which of the following assets is not subject to depreciation and whose usefulness does not decline over time?

A capital expenditure is charged to owners' capital.

Any reasonable and necessary expenditures to place a newly acquired PPE asset in service should be debited to a separate asset account.

On 5 May 2013, Lloyd purchased a machine for $84,000. The estimated life of the machine was 10 years, with an estimated residual value of $10,000. The service life in terms of "output" is estimated at 8,000 hours of operation. -Assume Lloyd uses 150%-declining-balance depreciation with the half-year convention. Depreciation expense to be recognized in 2013 (the year of purchase) is:

Goodwill is only recorded when the value of a company increases and not when it decreases in value.

Various depreciation methods-first year On 24 March 2013 Tastee Ice Cream Co. purchased equipment costing $140,000, with an estimated life of 5 years and an estimated salvage value of $20,000. Compute the depreciation expense Tastee would recognize on this equipment in 2010 assuming: (a) Straight-line depreciation using the half-year convention \ (b) 200\% declining balance with fractional periods rounded to the nearest full month. \ (c) 150\% -declining-balance, using the half-year convention \

On 5 May 2013, Lloyd purchased a machine for $84,000. The estimated life of the machine was 10 years, with an estimated residual value of $10,000. The service life in terms of "output" is estimated at 8,000 hours of operation. -Assume Lloyd uses straight-line depreciation with the half-year convention. Depreciation expense to be recognized in 2013 (the year of purchase) is:

The entry to record amortization on a copyright would include:

Cranston Instrumentation sold a depreciable asset for cash of $150,000. The original cost of the asset was $600,000. Cranston recognized a gain of $22,500 on the sale. What was the amount of accumulated depreciation on the asset at the time of its sale?

An asset which costs $18,800 and has accumulated depreciation of $6,000 is sold for $11,600. What amount of gain or loss will be recognized when the asset is sold?

The journal entry to record depreciation expense consists of a credit to Accumulated Depreciation and a debit to the asset being depreciated.

The statement of financial position always reflects a company's current values.

Incidental costs incurred in the purchase of land that are charged to Land Improvements will affect profit at some future time.