Intro to accounting Chapter 8
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
__________ assets are assets used in a company's operations that have a useful life of more than one accounting period.
Plant
Which of the following expenses would not be considered an ordinary repair?
Replacing an engine
Consistent with the ________ principle, plant assets should be recorded at cost, which includes all the normal and reasonable expenditures necessary to get the asset in place and ready for its intended use.
cost
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
On January 1, Bora Co. purchased a delivery van for $22,000. Bora expects to drive the van for approximately 5 years or 100,000 miles, before disposing of it for an estimated salvage value of $2,000. During the first year, Bora drives the van for 18,000 miles. How much would depreciation expense be if Bora uses the units-of-production depreciation method?
$3,600
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.
Rino Co. pays $35,000 for equipment. The machine's useful life is estimated at 10 years, or 50,000 units of product with a $5,000 salvage value. During the first year, the machine produced 12,000 units of product. How much depreciation expense will Rino record this first year based on the units-of-production depreciation method?
$7,200
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
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
Accumulated depreciation is recorded on which of the following financial statements?
Balance sheet
Accumulated depreciation is reported on which of the following financial statements?
Balance sheet
_______ are nonphysical assets (used in operations) that confer on their owners long-term rights, or competitive advantages.
Intangible assets
_______ are expenditures that keep an asset in normal, good operating condition. They are necessary if an asset is to perform to expectations over its useful life.
Ordinary repairs
Which of the following assets are amortized? (Check all that apply.)
Patent Copyright
(Plant/Current) __________ assets purchased as a group in a single transaction for a lump-sum price (also called a lump-sum, group, bulk, or basket purchase) are allocated the purchase price based on their relative market values.
Plant
The cost at which a company records purchases of machinery and equipment should include which of the following? (Check all that apply.)
Taxes Shipping fees Purchase price Installation
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.
Copyrights, trademarks, and other intangible assets are expensed over their useful lives through the process of:
amortization
Straight-line depreciation is calculated by taking cost minus (salvage/market) __________ value divided by useful life.
salvage
Wyatt Co. purchased a popular symbol that doubled its sales in the first year. The cost of this symbol is an asset called a:
trademark
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
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
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 at the end of the period?
$13,000
Which of the following assets are amortized?
Copyright Patent
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.
Depreciation expense is reported as a decrease in which of the following financial statements?
Income statement
A plant asset is (depreciated/discarded/obsolete) __________ when it is no longer useful to the company, and it has no market value.
discarded
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
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
Straight-line depreciation can be calculated by taking:
(cost minus salvage value)/useful life
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 Testing Shipping charges
_________ are expenditures that make a plant asset more efficient or productive, but do not always increase an asset's useful life.
Betterments
Which of the following asset(s) are not considered intangible assets? (Check all that apply.)
Copy machine Mineral deposit
Which of the following items are plant assets? (Check all that apply.)
Equipment being used in operations Building being used for operations
The factors necessary to compute depreciation include all of the following, except:
book value.
The exclusive right to publish or sell a musical, literary, or artistic work during the life of the creator plus 70 years is called a
copyright
The factors necessary to compute depreciation include (cost/selling price/market value) __________, salvage value and useful life.
cost
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
Land __________ are assets that increase the benefits of land, have a limited useful life, and are depreciated—such as walkways and fences.
improvements
Assets that increase the benefits of land, have a limited useful life, and are depreciated—such as parking lots and street lights—are called:
land improvements.
The purchase of multiple plant assets for one purchase price is called a ______ purchase.
lump-sum
A symbol, name, phrase or jingle identified with a company, product or service is called a __________.
trademark
Niren Co. made modifications to a manufacturing machine that increased its productivity by 40%. Niren would classify this expense as a(n):
betterment.
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
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
