Ch 8 Plant Assets

Ion Co. purchased land for $190,000. Ion also paid $5,000 in brokerage fees, $1,000 in legal fees, and $500 in title costs. Ion should record the cost of this land to be:

$196,500

Daley Co. owns a mineral deposit with an estimated 600,000 tons of available ore. It was purchased for $300,000 and has no salvage value. During the current period, Daley mined and sold 40,000 tons of ore. Depletion expense for the period will be how much?

$300,000/600,000 x 40,000= $20,000

Plant assets should be recorded at cost, including all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use. This would include which of the following costs.

Assembling Shipping charges Testing

revenue

Expenditures are additional cost of plant assets that do not materially, increase the assets, life or capabilities

The cost at which a company records, purchases of machinery and equipment should include which of the following

Shipping fees Installation Taxes Purchase price

On October 30, Cleo Co. purchased a machine for $26,000 and estimates it will use the machine for four-years with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine's first year partial depreciation expense for October 30 through December 31.

This is a partial year depreciation. $26,000 - 2,000 = $24,000/4 = $6000 per year. $6000 x 2/12= $1,000.

Land _____. are assets that are additions to land and have limited useful lives, such as walkways and fences.

improvements

The purchase of a group of plant assets for one price is called a ______ purchase.

lump sum

Wen Co. purchased a building for $200,000. Wen paid $20,000 in lawyer and title fees. Wen also paid an additional $15,000 to modify the building in order to accommodate his business needs. Wen should record the cost of the building at:

$200,000+$20,000+$15,000=$235,000

PT Co. purchased land and an existing building for $200,000. In addition, PT paid closing costs of $15,000. PT removed the building and regraded the land for a total cost of $35,000. PT should record the cost of the land for:

$250,000 Reason: 200,000+15,000+35,000=250,000

Alin Co. purchases a building for $300,000 and pays an additional $30,000 for closing costs (brokerage, title, attorney fees). Alin also pays $20,000 in renovations, including painting, carpet, lighting, etc. Alin should record the cost of the building at:

$350,000

A company acquires a patent for $20000 to manufacture and sell an item. The company intends to hold the patent for five years. Amortization for the first year will be recorded with a debit to amortization expense for.

4000

Geo Co. purchased a building for $400,000. In addition, Geo paid $35,000 closing fees (including title and lawyer fees). Geo also paid $60,000 to modify the building, changing the layout specifically for Geo's needs. Geo should record the building at $

495000

Which of the following situations will result in recognizing a gain on the sale of a plant asset

A fully depreciated asset is sold for $1,000.

The factors necessary to compute depreciation include salvage value and useful life

Cost

Determine which of the following expenses are considered revenue expenditures related to a company vehicle

Dent repair Oil change Car wash

The process of allocating, the cost of a natural resource to eat. When it is consumed, requires a debit entry to the

Depletion expense account

Is the process of allocating the cost of a plant asset to an expense well, it is in use

Depreciation

A plant asset is____ when it is no longer useful to the company and it has no market value

Discarded

Betterments

Expenditures to make a plant asset more efficient or productive; but do not always increase in assets useful

Assets that increase the benefits of them and have a limited useful life such as parking lots in lighting systems are called

Land improvement

On December 31, Briar Co. disposed of a piece of equipment that cost $6,000 with accumulated depreciation of $4,500. The entry to record this disposal would include a debit to which account and for how much?

Loss on Disposal of Equipment for $1,500

Book value is greater than the selling price Book value is less than the selling price Book value is equal to the selling price

Loss on sale of asset Getting on sale of asset No gain or loss recognized

Forward co discarded a machine that cost $5000 and it was fully depreciated. The entry to record this transaction will include a credit to the.

Machinery account

Which of the following assets are amortized?

Patent/Copyright

Which of the following expenses would not be considered an ordinary repair?

Replacing an engine

Total asset turnover is computer as net _____ / average total assets

Sales

The factors necessary to compute depreciation, include all of the following, except

book value

Straight line depreciation is calculated by taking cost minus ___ value divided by useful life

salvage

A company owns an asset that is fully depreciated. The asset is no longer being used in operations and has no market value. The company has decided to ________ the asset by recording an entry to remove it from the balance sheet.

to discard

Tops Co. purchases equipment for $12,000 and has been using straight-line depreciation, estimating a 5-year life and $500 salvage value. At the beginning of the third year, Tops decides to use the equipment for a total of 6-years with no salvage value. Compute the revised depreciation for the third year.

(12,000-500)/5=2,300 per year. $2,300 x 2 years = $4,600 depreciation taken. Book value at beginning of year 3 = $12,000-4,600= $7,400/4 = $1,850.

Seven Co. owns a coal mine with an estimated 1,000,000 tons of available coal. It was purchased for $300,000 and has $50,000 salvage value. During the current period, Seven mined and sold 200,000 tons of coal. Depletion expense for the period will be how much?

(300,000 - 50,000)/1,000,000 x 200,000 = $50,000.

Peavey Enterprises purchased a depreciable asset for $22,000 on April 1, Year 1. The asset will be depreciated using the straight-line method over its four-year useful life. Assuming the asset's salvage value is $2,000, Peavey Enterprises should recognize depreciation expense in Year 2 in the amount of:

$5,000 Depreciation Expense = (Cost − Salvage Value)/Estimated Useful Life Depreciation Expense = ($22,000 − $2,000)/4 = $5,000

On June 1, Harding Co. purchased a machine for $14,000 and estimates it will use the machine for five-years with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine's first year (partial) depreciation expense for June 1st through December 31st.

(14,000-2000)/5 x 7/12=1,400 for a partial year depreciation. $1,400

Plant assets are recorded at cost, which includes all expenditures necessary to get the asset in place and ready for use. All of the following would be included as part of the cost of a plant asset, except.

damage done when unpacking the plant asset