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Exam 18: Property, Plant, and Equipment

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Question 41

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When the units-of-output method is used to compute depreciation, the useful life of an asset is the number of units of work the asset will perform.

A) True
B) False

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Question 42

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The balance of an Accumulated Depletion account is subtracted from the related natural resource account to determine the book value of the natural resource.

A) True
B) False

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Question 43

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The recorded cost of an asset should include both the net invoice price and all transportation and installation costs.

Accumulated Depreciation is classified as a contra asset account.

All of the following refer to the handling of a decline in value of property, plant, and equipment except

The salvage value is the value that the asset is expected to have at the end of its useful life.

The entry to record the amortization of acquisition cost of an intangible asset includes a credit directly to the intangible asset account.

An asset that cost $25,000 was sold for $8,000 cash. Accumulated depreciation on the asset was $16,000. The entry to record this transaction includes the recognition of

In determining the impairment of a long-term asset, an accountant applies the _________________ test to compare the asset's net book value with estimated cash flows from the asset's future use.

The term used to describe the process of allocating the acquisition cost of an intangible asset to expense during its estimated useful life is ___________________.

The normal balance of Accumulated Depreciation is a(n) ___________________.

If a depreciable asset is sold for an amount that is lower than the asset's book value, a(n) ____________________ is recognized.

The difference between the acquisition cost of an asset and its accumulated depreciation is called the ___________________.

Assume that a business trades in an old cash register for a new one. Under the income tax method,

The term used to describe the periodic transfer of the acquisition cost to expense when minerals or other natural resources are physically removed during production is ___________________.

On, January 2, 2013, Rubble Sand and Gravel Company purchased equipment for $77,000. The equipment was to be used for five years and had a $2,000 estimated residual value. On January 2, 2013, equipment was sold for $35,000. Record the transactions on page 9 of a general journal. Omit descriptions.

The modified accelerated cost recovery system (MACRS) is acceptable for financial accounting purposes because it matches the costs of assets with the revenues produced by those assets.

When the sum-of-the-years'-digits method is used to depreciate an asset with a four-year life, the depreciation expense for the fourth year is computed by multiplying the difference between the cost and the salvage value by the fraction ___________________.

To calculate declining-balance depreciation, it is necessary to multiply the ____________________ of an asset by an appropriate rate.

Using the information shown, record the journal entries to record the amount of the impairment for these two situations.