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Exam 9: Plant Assets, Natural Resources, and Intangible Assets

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Question 31

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Yocum Company purchased equipment on January 1 at a list price of $120,000, with credit terms 2/10, n/30. Payment was made within the discount period and Yocum was given a $2,400 cash discount. Yocum paid $6,000 sales tax on the equipment, and paid installation charges of $1,760. Prior to installation, Yocum paid $4,000 to pour a concrete slab on which to place the equipment. What is the total cost of the new equipment?

A) $125,360
B) $129,360
C) $131,760
D) $123,600

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Question 32

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Research and development costs can be classified as a property, plant, and equipment item or as an intangible asset.

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Question 33

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A plant asset cost $90,000 when it was purchased on January 1, 2008. It was depreciated by the straight-line method based on a 9-year life with no salvage value. On June 30, 2015, the asset was discarded with no cash proceeds. What gain or loss should be recognized on the retirement?

Depreciation is a process of

In computing depreciation, salvage value is

The book value of a plant asset is the amount originally paid for the asset less anticipated salvage value.

The cost of a new asset acquired in an exchange that has commercial substance is the cash paid plus the

On January 1, a machine with a useful life of five years and a residual value of $30,000 was purchased for $90,000. What is the depreciation expense for year 2 under the double-declining-balance method of depreciation?

On a balance sheet, natural resources may be described more specifically as all of the following except

Sargent Corporation bought equipment on January 1, 2015. The equipment cost $360,000 and had an expected salvage value of $60,000. The life of the equipment was estimated to be 6 years. Assuming straight-line deprecation, the book value of the equipment at the beginning of the third year would be

If a plant asset is retired before it is fully depreciated, and the salvage value received is less than the asset's book value,

Depletion cost per unit is computed by dividing the total cost of a natural resource by the estimated number of units in the resource.

Salem Company hired Kirk Construction to construct an office building for £6,400,000 on land costing £1,600,000, which Salem Company owned. The building was complete and ready to be used on January 1, 2015 and it has a useful life of 40 years. The price of the building included land improvements costing £480,000 and personal property costing £600,000. The useful lives of the land improvements and the personal property are 10 years and 5 years, respectively. Salem Company uses component depreciation, and the company uses straight-line depreciation for other similar assets. What is the net amount reported for the building on Salem Company's December 31, 2015 statement of financial position?

When purchasing land, the costs for clearing, draining, filling, and grading should be charged to a Land Improvements account.

If a company incurs legal costs in successfully defending its patent, these costs are recorded by debiting

Conceptually, the cost allocation procedures for natural resources parallels that of plant assets.

A loss on the exchange of plant assets occurs when the fair market value of the old asset is less than its book value.

If a plant asset is retired before it is fully depreciated, and no salvage or scrap value is received,

Able Towing Company purchased a tow truck for $180,000 on January 1, 2014. It was originally depreciated on a straight-line basis over 10 years with an assumed salvage value of $36,000. On December 31, 2016, before adjusting entries had been made, the company decided to change the remaining estimated life to 4 years (including 2016) and the salvage value to $5,000. What was the depreciation expense for 2016?

If the proceeds from the sale of a plant asset exceed its book value, a gain on disposal occurs.