Exam 8: Operating Assets: Property, plant, and Equipment, and Intangibles

Crouch Apartments purchased an apartment building to rent to university students on December 15,2012.The tenants moved in on January 1,2013.On Super Bowl Sunday,a student punched a hole in the wall when his favorite team fumbled the ball.It cost the landlord $400 to repair the hole.How should this cost be recorded?

Yu Corporation Use the following Assets section of Yu Corporation's balance sheets for the years ended December 31,2013 and 2012 to answer the questions that follow. Yu Corporation recorded depreciation expense of $344 million for 2012. Refer to the information for Yu Corporation. Required: (1)Which items on Yu's balance sheet could be considered intangible assets? Explain the nature of each of these. (2)Explain why it is important that Yu disclose the amounts expended on research and development each year.

Explain by what processes the costs of operating assets are allocated to expense.

If technology changes rapidly,a firm should

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

When land and building are acquired for a lump sum,the purchase amount should be allocated on the basis of the market values of the two assets.

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

For each of the following intangible assets,indicate the amount of amortization expense that should be recorded for the year 2014 and the amount of accumulated amortization on the balance sheet as of December 31,2014 .

All of the following statements are true except:

Sacramento Corp.constructed equipment to manufacture a new line of home products during 2013.The average balance of accumulated expenditures on the equipment during September through December 2013 was $500,000.Construction started on September 1,2013 and was still in progress at the end of 2013.If Sacramento borrowed $500,000 for one year on September 1,2013,to finance the construction,and the interest rate on the construction loan was 6%,how much interest can Sacramento capitalize as part of the equipment cost for 2013?

Lightning Delivery,Inc.purchased a truck on January 1,2013,for $30,000.The truck had an estimated life of 5 years and an estimated residual value of $5,000.Lightning Delivery used the straight-line method to depreciate the asset.On July 1,2015,the truck was sold for $17,000 cash.The journal entry to record the sale of the truck in 2015

Depreciation has no effect on income taxes,since it only reduces a plant asset's book value.

Fall Corp.uses plant assets that are subject to rapid decreases in value due to obsolescence and physical deterioration.Which of the following depreciation methods is most appropriate to measure the decline in the usefulness of the company's assets?

Double-declining-balance depreciation is most commonly used by businesses for financial reporting purposes.

Given below are several accounts and balances from Montag Corporation's 2013 financial statements.Prepare the Property,Plant,and Equipment section of the balance sheet and a partial income statement in the space provided below using the accounts provided.

Distinguish between tangible and intangible operating assets.

Grover,Inc. Grover,Inc.purchased a crane at a cost of $80,000.The crane has an estimated residual value of $5,000 and an estimated life of 8 years,or 12,500 hours of operation.The crane was purchased on January 1,2013 and was used 2,700 hours in 2013 and 2,600 hours in 2014. Refer to the information for Grover,Inc, Based on this information,what method of depreciation will produce the maximum depreciation expense in 2014?

Please answer the following questions regarding depreciation: ______________________________ is the GAAP depreciation method considered "accelerated"?

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

Harkin Company purchased a building on a tract of land and allocated the entire cost of the purchase to building.Normally it depreciates buildings over 20 years using the straight-line method with zero residual value and does not depreciate land.Because of its accounting treatment of the purchase,Harkin's income before taxes for the next 20 years will be