5.06 Chapter 8 Connect SmartBook

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

Geo Co. purchased a building for $400,000. In addition, Geo paid $35,000 for taxes 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 $.

Blank 1: 495000 or 495,000

Land (improvements/additions) are assets that are additions to land and have limited useful lives, such as walkways and fences.

Blank 1: improvements or improvement

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

Blank 1: salvage

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

Building used for operations Equipment used in operations

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

Copyright Patent

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

Dent repair Oil change Car wash

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

Depreciation

The cost of plant assets should include all of the normal and reasonable expenditures necessary to get the asset in place and ready for its intended use, including repairs to damages incurred after installation

False

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

Intangible assets

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

Forward Co. discarded a machine that cost $5,000 and was fully depreciated. The entry to record this transaction would include a credit to the Blank______ account.

Machinery

______ 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

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

Salvage value Cost of asset Useful life

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

Shipping fees Taxes Purchase price Installation

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? (Check all that apply.)

Testing Shipping charges Assembling

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

amortization

The total asset turnover ratio is computed by taking net sales divided by:

average total assets

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

book value

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

book value

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

$350,000.

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

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

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

(Plant/Current) assets purchased as a group in a single transaction for a lump-sum price are allocated the purchase price based on their relative market values.

Blank 1: Plant

The process of allocating the cost of a plant asset to expense while it is in use is called (depreciation/salvage) _.

Blank 1: depreciation

______ are expenditures that make a plant asset more efficient or productive, but do not always increase an asset's useful life.

betterment

Niren Co. made modifications to a manufacturing machine that increased its productivity by 40%. Niren would classify this expense as a(n):

betterment.

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 Blank______ the asset by recording an entry to remove it from the balance sheet.

discard

A plant asset is (depreciated/discarded/obsolete) when it is no longer useful to the company, and it has no market value.

discarded

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

Mineral deposit Copy machine

To calculate depletion expense, first determine the depletion per unit. Depletion per unit can be calculated by taking (cost Blank______)/total units of capacity.

Minus salvage value

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

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: Multiple choice question.

$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?

$20,000

PT Co. purchased land and an existing building for $200,000. In addition, PT paid real estate commissions of $15,000. PT removed the unwanted building and graded the land for a total cost of $35,000. PT should record the cost of the land at:

$250,000

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

Straight-line depreciation can be calculated by taking:

(cost minus salvage value)/useful life

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

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

land improvements

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

lump-sum

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

natural resource

Total asset turnover is computed as net /average total assets.

net SALES

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

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:

$235,000

assets are assets used in a company's operations that have a useful life of more than one accounting period.

Blank 1: Plant or Fixed

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

Blank 1: Revenue

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

patent