Chapter 10 smartbook activity

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

Book value can be calculated by taking an asset's acquisition costs less its _________ __________.

Accumulated Depreciation

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.)

Assembling Shipping charges Testing

Accumulated depreciation is recorded on which of the following financial statements?

Balance sheet

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

Betterments

The asset's acquisition costs less its accumulated depreciation is called:

Book Value

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

When considering the sale of a plant asset, match the following outcomes to the appropriate situations. Book value is greater than the selling price- Book value is less than the selling price- Book value is equal to the selling price-

Book value is greater than the selling price- Loss Book value is less than the selling price- Gain Book value is equal to the selling price- No gain or loss

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

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

Cost of asset Salvage value Useful life

A company sells a machine that cost $7,000 for $500 cash. The machine had $6,500 accumulated depreciation. The entry to record this transaction will include which of the following entries? (Check all that apply.)

Credit to Machinery for $7,000 Debit to Accumulated Depreciation - Machinery for $6,500 Debit to Cash for $500.

Zion Co. paid cash for an upgrade to an existing machine that would reduce the amount of waste produced by the machine and, therefore, increase efficiency. The journal entry to record this upgrade would include which of the following entries? (Check all that apply.)

Debit to Machinery Credit to Cash

Privo Co. purchases a machine that cost $15,000. Privo estimates a 5-year life with no salvage value. The first three years of depreciation expense are $6,000; $3,600; and $2,160, respectively. Based on this information, Privo is using the ________ depreciation method.

Declining-balance

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

Dent repair Car wash Oil change

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

Which of the following items related to depreciating equipment would be found on a company's income statement?

Depreciation Expense - Equipment

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.

Discard

Quick Catering Co. paid for a refrigeration system to be added to their delivery van to keep the food cooled during deliveries. To record this expense, Quick would debit the ______ account.

Equipment

Sioux Co. replaced the roof on its existing building, therefore increasing the building's life by 10 years. The cost of the roof is considered a(n):

Extraordinary repairs

______ are expenditures that extend the asset's useful life beyond its original estimate.

Extraordinary repairs

True or False: 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

ATZ Co. sells equipment that cost $9,000 with current accumulated depreciation of $8,000 for $2,000 cash. To record this transaction, ATZ will credit which accounts? (Check all that apply.)

Gain on Sale of Equipment Equipment

Sangmoon Co. sells equipment for $1,000 cash. The equipment cost Sangmoon $6,500 and is fully depreciated at the time of sale and has no salvage value. Sangmoon will record the sale with a credit to which account and for how much?

Gain on Sale of Equipment for $1,000.

Depreciation Expense is reported on which of the following financial statements?

Income Statement

T. Chung Co. sold a computer for $500 cash. The computer cost $3,000 and had accumulated depreciation of $2,200 at the time of the sale. Chung will record the sale with an entry to the (Gain/Loss) on Disposal of Equipment account in the amount of $________

Loss 300

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 ______ 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

_____________(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.

Plant

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

Plant or Fixed

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

Revenue

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

Salvage

_____ value, also called residual value or scrap value, is an estimate of the asset's value at the end of its useful life.

Salvage

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

Taxes Installation Purchase price Shipping fees

Martinez Co. sells a machine that cost $10,000 with accumulated depreciation of $8,000 for $2,000 cash. The entry to record this transaction will recognize a gain or loss of how much?

There is no gain or loss.

The method of depreciation that charges a varying amount to depreciation expense for each period depending on its usage is called the ______ method.

Units-of-production

The ______ life of a plant asset is the length of time it is productively used in a company's operations.

Useful

The __________ life (also called service life) is the length of time the asset is productively used in a company's operations.

Useful

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

betterment

Accumulated depreciation is a ___________ asset account (one that is linked with the plant asset account, but has an opposite normal balance) and is reported on the balance sheet.

contra

The factors necessary to compute depreciation include __________ (cost/selling price/market value), salvage value and useful life.

cost

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

The depreciation method that determines the depreciation for the period by multiplying a depreciation rate (often twice the straight-line rate) by the asset's beginning-period book value is known as the _________ method.

declining-balance

An oil company recognizes the cost of discovering and operating oil wells by recording ______ expense for each unit of oil used.

depletion

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

depreciation

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

improvements

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 ______ 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

Grand Co. owns one copier that was purchased for $10,000 three years ago. The depreciation expense taken on the copier each year has been $2,700; $1,800; and $2,200, based on the number of copies that have been made on the copier. Based on this information, the company uses the ________ depreciation method.

units-of-production

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 (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 (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.

A delivery van that cost $45,000 with accumulated depreciation of $15,000 is sold for $20,000. How much gain or loss will be recognized on this sale?

$10,000 loss

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.

$1000 $26,000 - 2,000 = $24,000/4 = $6000 per year. $6000 x 2/12 = $1,000

Arc Co. purchased a piece of equipment for $25,000. At the end of the year, the book value of the equipment is $12,000. The salvage value is 0. How much is accumulated depreciation, using the straight-line method, at the end of the period?

$13,000 15,000-12,000=13,000

Ring Co. owns a delivery van that was purchased two years ago for $25,000. Ring has depreciated the van for two years at a straight-line amount of $4,000 per year. The book value of this van at the end of the second year would be $__________.

$17000

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

On January 3, ATA Company purchases a copy machine for $11,500. The machine is expected to last five years and have a salvage value of $1,500. Compute depreciation expense for the first year, assuming the company uses the straight-line method.

$2000 (11,500-1,500)/5 =2,000

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 (200,000+15,000+35,000=250,000)

Bina Co. purchased a vehicle on January 1st for $15,000 and estimates it will use the vehicle for eight years with a $3,000 salvage value. Using the double declining-balance depreciation method, compute the vehicle's second year depreciation expense.

$2812.50 Salvage value is not subtracted up front with the double-declining balance method. (100%/8=.125) x 2=25%. 15,000 x 25%=3,750 for first year. Second year=(15,000-3750) x 25% =2812.50. The question asked for the second year depreciation expense.

Juno Co. purchased a machine for $10,000 and estimates it will use the machine for three years with a $2,000 salvage value. It expects to produce a total of 8,000 units as follows: 3,000 during year one; 2,500 during year two; and 2,500 during year three. Using the units-of-production depreciation method, compute the machine's first year depreciation expense.

$3,000 Reason: $10,000 - 2,000 = $8,000. $8,000 / 8000 units = $1.00 per unit. Year one 3,000 x $1.00 = $3,000.

Bina Co. purchased a machine on January 1st for $15,000 and estimates it will use the machine for three years with a $3,000 salvage value. Bina estimates that they will produce 1,500 units during year one, 1,000 units during year two, and 1,250 units during year three. Using the units-of-production method, compute the machine's second year depreciation expense.

$3,200 $15,000 - $3,000 = $12,000. Total units = 1,500 + 1,000 + 1,250 = 3,750. $12,000 / 3,750 = $3.20 per unit. Year two 1,000 x $3.20 = $3,200.

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 (300,000+30,000+20,000)

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 $_________

$495,000

Juno Co. purchased a machine for $10,000 and estimates it will use the machine for four years with a $2,000 salvage value. Using the double declining-balance depreciation method, compute the machine's first year depreciation expense.

$5,000 $10,000 x (.25 x 2) = $5,000.

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

At the beginning of the year, Jobs Co. owned one piece of office equipment, a copier. The copier was purchased two years ago for $12,000. At the beginning of the year, the balance in accumulated depreciation was $4,000. Jobs uses straight-line depreciation of $2,000 per year with a zero-salvage value. How much is accumulated depreciation at the end of the year?

$6,000 4,000 + 2,000 = 6,000

Straight-line depreciation can be calculated by taking:

(cost minus salvage value)/useful life

On January 1, Enco Co. purchases a milling machine for $15,000. The machine is expected to last seven years and have a salvage value of $1,000. Assuming the company uses the straight-line method, depreciation expense should be $_____________ per year.

2000