Chapter 8 Smartbook

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

betterment

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

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.

_________ are expenditures that make a plant asset more efficient or productive, but do notalways increase an asset's useful life.

Betterments

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

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

Oil change Dent repair Car wash

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

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

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

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

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

depreciation

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

land improvements

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

natural resource

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.

original cost