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Exam 7: Plant Assets and Intangibles

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Question 1

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In a lump- sum purchase of assets, the relative sales value is defined as the:

A) ratio of each asset's market value to the total book value.
B) ratio of each asset's market value to the total market value.
C) total price paid less the value of the most valuable asset.
D) total price paid compared to the total market value.

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Question 2

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Under the MACRS depreciation method, automobiles and equipment are depreciated using the:

A) IRS units- of- production method.
B) straight- line method.
C) double- declining- balance method.
D) 150%- declining- balance method.

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Question 3

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An example of a long- term asset would be:

Pat's Pets recently paid to have the engine in its delivery van overhauled. The estimated useful life of the van was originally estimated to be 7 years. The overhaul is expected to extend the useful life of the van to 9 years. The overhaul is regarded as an) :

The portion of the cost of natural resources that is consumed in a particular period is called:

The use of the straight- line method of computing depreciation increases a company's tax liability, thereby increasing the company's cash flow.

Of the plant assets, buildings are depreciated because these are long- term tangible assets.

Patch Company sold some office furniture for $4,800 cash. The furniture cost $31,500 and had accumulated depreciation through the date of sale totaling $29,300. The journal entry to record the sale of the furniture will include a:

Research and development costs are expensed over their useful or legal life.

When an asset is fully depreciated:

Amortization is most closely associated with which asset?

On January 2, 2008, Bantam Oil Company purchased an oil well for $625,000. The well contains an estimated 150,000 barrels of oil, with an estimated residual value of $25,000. During 2008, 15,000 barrels of oil were removed from the well. To record depletion for 2008, Bantam Oil Company will debit Depletion Expense for:

Jackson Corporation acquired equipment on January 1, 2007, for $320,000. The equipment had an estimated useful life of 10 years and an estimated salvage value of $25,000. On January 1, 2010, Jackson Corporation revised the total useful life of the equipment to 8 years and the estimated salvage value to be $20,000. Compute depreciation expense for the year ending December 31, 2010, if Jackson Corporation uses straight- line depreciation.

The journal entry to record a major expenditure to upgrade equipment that extends its useful life beyond the original estimate would include a:

The consistency principle applauds a company for revising either the estimated useful life or the residual value of an asset.

The process of allocating a plant asset's cost to expense over the period in which the asset is used is called:

The expected cash value of a plant asset at the end of its useful life is known as:

GAAP requires that companies use different depreciation methods for financial reporting purposes than they use for income tax purposes.

A gain will result when the book value of a plant asset exceeds the cash received from the sale of the asset.

The cost of installing shrubbery should be recorded as: