Plant Assets, Natural Resources, and Intangibles - Chapter 10 - Smartbook

Which of the following items are plant assets? (Check all that apply.)

Equipment being used in operations Building being used for operations

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

Improvements

_______ are nonphysical assets used in operations that give companies long-term rights, or competitive advantages.

Intangible assets

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?

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

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.

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

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.

$1,400 Reason: (14,000-2000)/5 x 7/12=1,400 for a partial year depreciation The partial year depreciation should be recorded for seven months (June 1- December 31).

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.

$1,850 Reason: (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.

Ion Co. purchased land for $190,000. Ion also paid $5,000 in real estate commissions, $1,000 in legal fees, and $500 in title insurance fees. Ion should record the cost of this land at:

$196,500

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?

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

Straight-line depreciation can be calculated by taking:

(cost minus salvage value)/useful life

Ella Co. owns a mineral deposit and recognizes $15,000 of depletion expense during the period. This entry will be recorded with a credit to:

Accumulated Depletion - Mineral Deposit

Which of the following assets are amortized? (Check all that apply.)

Copyright Patent

The process of allocating the cost of a natural resource to a period when it is consumed requires a debit entry to the _________________ ________________ account.

Depletion expense

______ is the process of allocating the cost of a plant asset to expense while it is in use.

Depreciation

______ are assets that are physically consumed when used, such as mineral deposits and oil and gas fields.

Natural resources

_______ are expenditures that keep an asset in good operating condition. They are necessary if an asset is to perform to expectations over its useful life.

Ordinary repairs

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

Replacing an engine

(Revenue/Capital)_______________ expenditures are additional costs of plant assets that do not materially increase the asset's life or capabilities.

Revenue

The cost at which a company records purchases of machinery and equipment should include which of the following? (Check all that apply.)

Taxes Purchase price Installation Shipping fees

Which of the following factors determine depreciation? (Check all that apply.)

Useful life Cost of asset Salvage value

Copyrights, trademarks, and other intangible assets are expensed over their useful lives through the process of:

amortization

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

book value.

Brice Co. purchases land in order to drill oil. This oil field would be classified as a(n) _______ on the balance sheet.

natural resource

Straight-line depreciation is calculated by taking cost minus (salvage/market) ___________ value divided by useful life.

salvage

Which of the following asset(s) are not considered intangible assets? (Check all that apply.)

Mineral deposit Copy machine

When a company revises an estimate used to record depreciation expense, the company should revise depreciation by using the formula (_______ - revised salvage value)/revised remaining useful life.

book value

____________________ is the process of allocating the cost of a plant asset to expense while it is in use.

Depreciation

A _______ is an exclusive right granted to its owner to manufacture and sell an item or use a process for 20 years.

patent

Determine which of the following expenses are considered revenue expenditures related to a company vehicle. (Check all that apply.)

Dent repair Car wash Oil change

A company acquires a patent for $20,000 to manufacture and sell an item. The company intends to hold the patent for 5 years. Amortization for the first year will be recorded with a debit to Amortization Expense for $_______________.

4000 Reason: (20000-0)/5 =4000

________is the process of allocating the cost of a plant asset to expense while it is in use.

Depreciation

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

lump-sum