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Exam 9: Property, Plant, and Equipment, Intangible Assets and Natural Resources

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Question 41

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Louisville Farms, a breeder of racehorses, paid $432,000 cash for a prize-winning stallion on 1 January 2007. The stallion is depreciated on a straight-line basis, with depreciation for partial years rounded to the nearest month. Estimated useful life was nine years, with no residual value. After owning the animal for six years and five months, Louisville Farms sold the stallion on 31 May 2013, for cash of $85,000. Depreciation had last been recorded on 31 December, 2012. -Compute the book value of the stallion at 31 May of 2013, the date of sale. $______________

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Book value of the stallion at 31 May 201...

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Question 42

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The rule of consistency does not require a company to use the same method of depreciation from year to year for all assets.

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Question 43

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Depreciation is a process of asset valuation.

The term property, plant and equipment assets refers to long-lived assets acquired for use in business operations, rather than for resale to customers.

The gain on the disposal of equipment is recognized when:

Land is purchased for $456,000. Additional costs include a $30,300 fee to a broker, a survey fee of $3,400, $2,750 to construct a fence, and a legal fee of $12,500. What is the cost of the land?

On 30 April 2013, Tilton Products purchased machinery for $88,000. The useful life of this machinery is estimated at 8 years, with an $8,000 residual value. -Refer to the above data. Assume that in its financial statements, Tilton Products uses the 150%-declining-balance method and the half-year convention. Depreciation expense in 2013 and 2014 will be:

To capitalize an expenditure means charging it to an asset account.

An asset which costs $14,400 and has accumulated depreciation of $8,000 is sold for $5,600. What amount of gain or loss will be recognized when the asset is sold?

Lewis Imports sold a depreciable plant asset for cash of $135,000. The accumulated depreciation amounted to $170,000, and a loss of $15,000 was recognized on the sale. Under these circumstances, the original cost of the asset must have been:

All of the following assets are amortized except:

If the 150% declining balance method is being used and an asset has a useful life of 20 years what is the depreciation rate?

An accelerated depreciation method:

On 12 March 2013, Shoreham, Inc. acquired melting equipment for $45,600. The estimated life of the equipment is 6 years, with an estimated residual value of $2,400. -In its financial statements, Shoreham uses straight-line depreciation with the half-year convention. The book value of the equipment at 31 December 2014 will be:

Accounting terminology Listed below are nine technical accounting terms introduced in this chapter: $\begin{array} { | l | l | l | } \hline \text { Half-year corvention } & \text { Capital expenditure } & \text { Accelerated depreciation } \\\hline \text { Reveruue expenditure } & \text { Straight-lire } & \text { Goodwill } \\\hline \text { Accurrulated depreciation } & \text { Research } & \text { depletion } \\\hline\end{array}$ Each of the following statements may (or may not) describe one of these technical terms. In the space provided below each statement, indicate the accounting term described, or Answer "None" if the statement does not correctly describe any of the terms. (a.) An expenditure to pay an expense of the current period. (b.) An account showing the portion of the cost of a PPE asset that has been written off to date as depreciation expense. (c.) A policy that fractional-period depreciation on assets acquired or sold during the period should be computed to the nearest month. (d.) An intangible asset representing the present value of future earnings in excess of normal return on net identifiable assets. (e.) Expenditures that could lead to the introduction of new products, but which, according to IFRS, should be viewed as an expense of the current accounting period. (f.) Depreciation methods that take less depreciation in the early years of an asset's useful life, and more depreciation in the later years. (g.) Depreciation methods that take more depreciation in the early years of an asset's useful life, and less depreciation in the later years.

The Sarbanes-Oxley Act requires that companies disclose whether they have a code of ethics that applies to the CEO, CFO, and Chief Accounting Officer.

When a company uses straight-line depreciation and the half-year convention, assets with a five-year life:

Accelerated depreciation methods are used primarily in:

Tomassi Company paid $450,000 to acquire a piece of real estate consisting of land and an office building with a parking lot. In this situation:

Caan purchased the Stokes Mine for $600 million. The mine was estimated to contain 6 million tons of anthracite coal and to have a residual value of $120 million. During the first year of mining operations of the Stokes Mine, 800,000 tons of anthracite were mined of which 600,000 tons was sold. Compute the following: $\begin{array}{|l|l}\hline\text { (a) Depletion recognized in the first year. } &\$\underline{\quad\quad\quad \quad} \\\hline\text { (b) Amount of the first year depletion recognized as } \\\hline\text { cost of goods sold. }&\$\underline{\quad\quad\quad \quad} \\\hline\end{array}$