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Exam 10: Plant Assets, Natural Resources, and Intangibles

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Question 51

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General, Inc. purchased a van on May 1, 2016, for $800,000. Estimated life of the van was five years, and its estimated residual value was $80,000. General uses the straight-line method of depreciation. Prepare the journal entry to record the depreciation expense for 2016 on the van.

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Question 52

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Exchanges of plant assets that have commercial substance require any gain or loss on the transaction to be recognized.

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Question 53

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The useful life of a plant asset is the length of the service period expected from the asset.

An oil well cost $2,090,000 and is calculated to hold 320,000 barrels of oil. There is no residual value. Which journal entry is needed to record the expense for the extraction of 54,000 barrels of oil during the year? All 54,000 barrels were sold ding the year. (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)

On January 1, 2015, Alda Solutions paid $200,000 to acquire Fancy Phones, Inc., an electronic gadget-advertising website. At the time of the acquisition, Fancy Phone's balance sheet reported total assets of $200,000 and liabilities of $100,000. The fair market value of Fancy Phone's assets was $200,000. The fair market value of its liabilities was $100,000. At the end of 2018, goodwill was measured, and its fair value was determined to be $60,000. Record the impairment of goodwill.

Businesses are required to use Modified Accelerated Cost Recovery System (MACRS) for tax purposes.

Nobells Corp. has acquired land and paid $500 as brokerage to acquire the land. However, the company's accountant has recorded the $500 as a revenue expenditure. What is the effect of this error?

When a business sells a plant asset for book value, a gain or loss should be recorded.

IFRS permits the presentation of plant assets at their fair market value because ________.

An asset is considered to be obsolete when a newer asset can perform the job more efficiently.

Water Drops, Inc. purchased equipment for $200,000. The company recorded total depreciation of $140,000. On January 1, 2017, the company exchanges the equipment for new equipment, paying $150,000 cash. The fair market value of the new equipment is $250,000. Prepare the journal entry to record this transaction. Assume the exchange has commercial substance.

Impairment of an intangible asset occurs when the book value of an asset is less than the fair value.

Which of the following is the correct accounting treatment for a patent?

On January 1, 2016, Amethyst Manufacturing Corporation purchased a machine for $40,000,000. The corporation expects to use the machine for 24,000 hours over the next six years. The estimated residual value of the machine at the end of the sixth year is $40,000. The schedule of usage of the machine is below. Prepare the depreciation schedule using the units-of-production method of depreciation.

The expected cash value of an asset at the end of its useful life is known as ________.

The gain or loss on the sale of a plant asset is determined by comparing market value of assets received with ________.

A photocopier cost $95,000 when new and has accumulated depreciation of $90,000. If the business discards this plant asset, the result is ________.

Plant assets are reported at book value on the balance sheet.

A natural resource is an asset that comes from the earth and is consumed.

If an asset is disposed of when it is fully depreciated and has no residual value, the business does not need to make a journal entry because the book value is zero.