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Exam 10: Plant Assets, Natural Resoures, and Intangibles

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Question 21

Multiple Choice

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Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $87,000. The machine's useful life is estimated to be 5 years, or 400,000 units of product, with a $7,000 salvage value. During its second year, the machine produces 84,500 units of product. Determine the machines' second year depreciation under the units-of-production method.

A) $16,000.
B) $20,880.
C) $17,400.
D) $18,379.
E) $16,900.

F) A) and C)
G) All of the above

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Question 22

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Plant assets can be disposed of by discarding, selling, or exchanging them.

A) True
B) False

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Question 23

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Financial accounting and tax accounting require the same recordkeeping and there should be no difference in results between the two accounting systems.

Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. What would be the depreciation expense for the second year of its useful life using the double-declining-balance method?

Plant assets are defined as:

A company used straight-line depreciation for an item of equipment that cost $12,000, had a salvage value of $2,000 and a five-year useful life. After depreciating the asset for three complete years, the salvage value was reduced to $1,200 but its total useful life remained the same. Determine the amount of depreciation to be charged against the equipment during each of the remaining years of its useful life:

The formula to compute annual straight-line depreciation is:

Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. What would be the book value of the asset at the end of the first year of its useful life using the double-declining-balance method?

Flask Company reports net sales of $4,315 million; cost of goods sold of $2,808 million; net income of $283 million; and average total assets of $2,136. Compute its total asset turnover.

Edmond reported average total assets of $9,965 million and net sales of $10,430 million. Its total asset turnover equals .96.

A company purchased equipment valued at $66,000. It traded in old equipment for a $9,000 trade-in allowance and the company paid $57,000 cash with the trade-in. The old equipment cost $44,000 and had accumulated depreciation of $36,000. This transaction has commercial substance. What is the recorded value of the new equipment?

Explain the difference between revenue expenditures and capital expenditures and how they are recorded in the accounting system.

Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000. The machine's useful life is estimated to be 5 years, or 300,000 units of product, with a $15,000 salvage value. During its first year, the machine produces 64,500 units of product. Determine the machines' first year depreciation under the straight-line method.

If land is purchased as a building site, the cost of removing existing structures is not charged to the Land account.

An asset's cost includes all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use.

An asset's book value is $36,000 on January 1, Year 6. The asset is being depreciated $500 per month using the straight-line method. Assuming the asset is sold on July 1, Year 7 for $25,000, the company should record:

An asset's book value is $18,000 on December 31, Year 5. The asset has been depreciated at an annual rate of $3,000 on the straight-line method. Assuming the asset is sold on December 31, Year 5 for $15,000, the company should record:

An accelerated depreciation method yields larger depreciation expense in the early years of an asset's life and less depreciation expense in later years.

Match each of the appropriate definitions with terms.

Spears Co. had net sales of $35,400 million. Its average total assets for the period were $14,700 million. Spears' total asset turnover equals: