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Exam 10: Plant Assets Natural Resoures and Intangibles

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Question 111

Multiple Choice

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Martinez owns machinery that cost $87,000 with accumulated depreciation of $40,000. The company sells the machinery for cash of $42,000. The journal entry to record the sale would include:

A) A debit to Accumulated Depreciation of $47,000.
B) A credit to Accumulated Depreciation of $40,000.
C) A debit to Cash of $42,000.
D) A credit to Gain on Sale of $2,000.
E) A credit to Machinery of $47,000.

F) A) and B)
G) B) and C)

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Question 112

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. -What journal entry would be needed to record the machines' second year depreciation under the units-of-production method?

A) Debit Depletion Expense $16,900; credit Accumulated Depletion $16,900.
B) Debit Depreciation Expense $16,900; credit Accumulated Depreciation $16,900.
C) Debit Depletion Expense $16,000; credit Accumulated Depletion $16,000.
D) Debit Amortization Expense $16,900; credit Accumulated Amortization $16,900.
E) Debit Depreciation Expense $16,000; credit Accumulated Depreciation $16,000.

F) A) and E)
G) D) and E)

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Question 113

Multiple Choice

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Cliff Company traded in an old truck for a new one. The old truck had a cost of $75,000 and accumulated depreciation of $60,000. The new truck had an invoice price of $125,000. Huffington was given a $12,000 trade-in allowance on the old truck, which meant they paid $113,000 in addition to the old truck to acquire the new truck. If this transaction has commercial substance, what is the recorded value of the new truck?

A company purchased mining property for $1,837,500 containing an estimated 7,350,000 tons of ore. In Year 1, it mined and sold 857,000 tons of ore. Calculate the depletion expense for Year 1 and prepare the journal entry to record the depletion.

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the units-of-production method. The company estimates it will use the machine for 5 years, during which time it anticipates producing 40,000 units. The machine is estimated to have a $4,000 salvage value. -The company produces 9,000 units in year 1 and 6,000 units in year 2. Depreciation expense in year 2 is:

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:

Betterments are:

A leasehold refers to the rights the lessor grants to the lessee under the terms of the lease.

Define plant assets and identify the four primary issues in accounting for them.

A company purchased mining property for $4,875,000 containing an estimated 15,000,000 tons of ore. In Year 1, it mined 689,000 tons of ore and in Year 2, it mined 935,000 tons. Calculate the depletion expense for Year 1 and Year 2 and determine the book value of the property at the end of Year 2.

Phoenix Agency leases office space for $7,000 per month. On January 3, Phoenix incurs $65,000 to improve the leased office space. These improvements are expected to yield benefits for 8 years. Phoenix has 5 years remaining on its lease. Compute the amount of expense that should be recorded the first year related to the improvements.

What are the general accounting procedures for recording asset disposals?

A machine originally had an estimated useful life of 6 years, but after 4 complete years, it was decided that the original estimate of useful life should have been 10 years. At that point the remaining cost to be depreciated should be allocated over the remaining:

Total asset cost plus depreciation expense equals book value.

The depreciation method that uses a depreciation rate that is a multiple of the straight-line rate and applies it to an asset's beginning-of-period book value is ________.

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:

Ordinary repairs meet all of the following criteria except:

It is necessary to report both the cost and the accumulated depreciation of plant assets in the financial statements.

Depletion is:

A company paid $595,000 for property that included land appraised at $384,000; land improvements appraised at $128,000; and a building appraised at $288,000. The plan is to use the building as a manufacturing plant. Determine the amounts that should be recorded as: a) Land $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\underline{\$\quad\quad}$ b) Land Improvements $\quad$$\underline{\$\quad\quad}$ c) Building $\quad$$\quad$$\quad$$\quad$$\quad$$\underline{\$\quad\quad}$