copyright © 2007 prentice-hall. all rights reserved 1 plant assets and intangibles chapter 10
Post on 21-Dec-2015
216 Views
Preview:
TRANSCRIPT
Copyright © 2007 Prentice-Hall. All rights reserved
1
Plant Assets and IntangiblesPlant Assets and Intangibles
Chapter 10
Copyright © 2007 Prentice-Hall. All rights reserved
2
All of the following are characteristics of a plant asset except:
1. Long-lived2. Used in production of income3. Held for resale to customers4. Has physical form
Copyright © 2007 Prentice-Hall. All rights reserved
3
Answer: 3
Copyright © 2007 Prentice-Hall. All rights reserved
4
All of the following assets are subject to depreciation except:
1. Land
2. Land improvements
3. Building
4. Equipment
Copyright © 2007 Prentice-Hall. All rights reserved
5
Answer: 1
Copyright © 2007 Prentice-Hall. All rights reserved
6
Which of the following costs would be included in the Land Improvements account?
1. Grading the land
2. Paving parking lot
3. Removal of useless, old barn on land
4. Mowing the grass
Copyright © 2007 Prentice-Hall. All rights reserved
7
Answer: 2Grading the land and removing the old building are added to the Land account. Mowing the grass is a maintenance expense.
Copyright © 2007 Prentice-Hall. All rights reserved
8
Tyne Company made a lump-sum purchase of land and building for $100,000. The appraised values for the land was $22,000 and the for the building was $88,000. How much should be debited to Building?
Copyright © 2007 Prentice-Hall. All rights reserved
9
Answer: $80,000
Total appraised value = $22,000 + $88,000 = $110,000
80% (88,000 ÷ 110,000) of the $100,000 cost should be allocated to the Building.
$100,000 x 80% = $80,000
Copyright © 2007 Prentice-Hall. All rights reserved
10
Which of the following costs is a capital expenditure?
1. Replace broken window in office building2. Paint foyer of office building3. Addition on building for three new offices4. Paid maintenance plan on heating system
Copyright © 2007 Prentice-Hall. All rights reserved
11
Answer: 3 An addition is a permanent improvement that makes the building more useful for a long period of time.
Copyright © 2007 Prentice-Hall. All rights reserved
12
On January 1, Finley Company purchased a machine for $9,000. It has a residual value of $1,000 and a useful life of 8 years or 10,000 hours of operation.
How much depreciation is recognized at the end of the first year of use assuming the company uses the straight-line method of depreciation.
Copyright © 2007 Prentice-Hall. All rights reserved
13
Answer: $1,000 (Cost – Residual value) ÷ Years of useful life($9,000 - $1,000) ÷ 8 years = $1,000
Copyright © 2007 Prentice-Hall. All rights reserved
14
On January 1, Finley Company purchased a machine for $9,000. It has a residual value of $1,000 and a useful life of 8 years or 10,000 hours of operation.If the machine operated for 1,200 hours during the year, how much depreciation is recognized at the end of the year assuming the company uses the units of production method of depreciation?
Copyright © 2007 Prentice-Hall. All rights reserved
15
Answer: $960 (Cost – Residual value) ÷ Total units of output($9,000 - $1,000) ÷ 10,000 hours = $0.80 per hour
$0.80 x 1,200 hours = $960
Copyright © 2007 Prentice-Hall. All rights reserved
16
On January 1, Finley Company purchased a machine for $9,000. It has a residual value of $1,000 and a useful life of 8 years or 10,000 hours of operation.
How much depreciation is recognized at the end of the first year assuming the company uses the double-declining balance method of depreciation?
Copyright © 2007 Prentice-Hall. All rights reserved
17
Answer: $2,250 (Cost–Accumulated depreciation) x (2/yrs of life) =($9,000 – 0) x (2/8) = $2,250
Copyright © 2007 Prentice-Hall. All rights reserved
18
If the amount of use of a machine varies from year to year, the depreciation method that best matches expense with revenue is
1. Straight-line2. Units of production3. Double-declining balance4. None of the above
Copyright © 2007 Prentice-Hall. All rights reserved
19
Answer: 2Depreciation expense is recognized only to extent that an asset has been used in a period.
Copyright © 2007 Prentice-Hall. All rights reserved
20
In 2005, Conway Company purchased an asset for $6,000. It was estimated to have a useful life of 5 years and a residual value of $1,000. The straight-line method of depreciation is used. At the beginning of 2007, Conway revises the estimated useful to a total of 8 years. How much depreciation expense will Conway recognize on the asset at the end of 2007?
Copyright © 2007 Prentice-Hall. All rights reserved
21
Answer: $500
Cost $6,000Depreciation for 2005 $1,000Depreciation for 2006 1,000 (2,000) Book value $4,000 Less residual value (1,000)
$3,000
$3,000 ÷ (8 – 2 years) = $500
Copyright © 2007 Prentice-Hall. All rights reserved
22
Roge Company owns a truck that cost $35,000 and has total accumulated depreciation of $20,000 to-date. Roge sells the truck for $10,000. What amount of gain/(loss) is recognized on the date of sale?
Copyright © 2007 Prentice-Hall. All rights reserved
23
Answer: ($5,000)Cost $35,000Accumulated Depreciation (20,000) Book value $15,000Cash received from sale (10,000) Loss on sale $5,000
Copyright © 2007 Prentice-Hall. All rights reserved
24
Research and development costs incurred by a company should be
1. Capitalized and amortized
2. Capitalized and remain on the books at cost
3. Expensed when incurred
4. Expensed only if the project is terminated
Copyright © 2007 Prentice-Hall. All rights reserved
25
Answer: 3
Copyright © 2007 Prentice-Hall. All rights reserved
26
The process of allocating the cost of a natural resource to expense is called
1. Depreciation
2. Depletion
3. Amortization
4. The cost of a natural resource is not allocated to expense
Copyright © 2007 Prentice-Hall. All rights reserved
27
Answer: 2
Copyright © 2007 Prentice-Hall. All rights reserved
28
When the utility of an intangible asset has declined, the process of transferring some of the cost of the intangible to expense is called
1. Depreciation
2. Depletion
3. Amortization
4. The cost of a intangible assets are never allocated to expense
Copyright © 2007 Prentice-Hall. All rights reserved
29
Answer: 3
Copyright © 2007 Prentice-Hall. All rights reserved
30
top related