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Exam 9: Reporting and Analyzing Long-Lived Assets

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Question 21

Multiple Choice

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Interest may be included in the acquisition cost of a plant asset

A) during the construction period of a self-constructed asset.
B) if the asset is purchased on credit.
C) if the asset acquisition is financed by a long-term note payable.
D) if it is a part of a lump-sum purchase.

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Question 22

Multiple Choice

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Equipment with a cost of $480,000 has an estimated salvage value of $30,000 and an estimated life of 4 years or 15,000 hours. It is to be depreciated using the units-of-activity method. What is the amount of depreciation for the first full year, during which the equipment was used 3,300 hours?

A) $120,000.
B) $135,600.
C) $99,000.
D) $112,500.

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Question 23

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

The IRS does not require the taxpayer to use the same depreciation method on the tax return that is used in preparing financial statements.

Rodgers Company purchased equipment and these costs were incurred: Rodgers will record the acquisition cost of the equipment as

Which one of the following items is not a consideration when recording periodic depreciation expense on plant assets?

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

Brevard Corporation purchased a taxicab on January 1, 2013 for $25,500 to use for its shuttle business. The cab is expected to have a five-year useful life and no salvage value. During 2014, it retouched the cab's paint at a cost of $1,200, replaced the transmission for $3,000 (which extended its life by an additional 2 years) , and tuned-up the motor for $150. If Brevard Corporation uses straight-line depreciation, what annual depreciation will Brevard report for 2014?

Goodwill can be recorded

The balance in the Accumulated Depreciation account represents the

Mitchell Corporation bought equipment on January 1, 2014. The equipment cost $180,000 and had an expected salvage value of $30,000. The life of the equipment was estimated to be 6 years. The depreciation expense using the straight-line method of depreciation is

An asset that cannot be sold individually in the market place is

Machinery was purchased for $170,000 on January 1, 2013. Freight charges amounted to $7,000 and there was a cost of $20,000 for building a foundation and installing the machinery. It is estimated that the machinery will have a $30,000 salvage value at the end of its 5-year useful life. What is the amount of accumulated depreciation at December 31, 2014, if the straight-line method of depreciation is used?

Additions and improvements to a plant asset that increase the asset's operating efficiency, productive capacity, or expected useful life are generally expensed in the period incurred.

Equipment costing $40,000 with a salvage value of $8,000 and an estimated life of 8 years has been depreciated using the straight-line method for 2 years. Assuming a revised estimated total life of 5 years and no change in the salvage value, the depreciation expense for Year 3 would be

Ordinary repairs should be recognized when incurred as revenue expenditures.

Compton Inc. made a $500 ordinary repair to a piece of equipment. Compton's accountant debited this amount to the asset account, Equipment and credited Cash. Was this the correct entry and if not, why not?

A factory machine was purchased for $70,000 on January 1, 2014. It was estimated that it would have a $14,000 salvage value at the end of its 5-year useful life. It was also estimated that the machine would be run 40,000 hours in the 5 years. If the actual number of machine hours ran in 2014 was 4,000 hours and the company uses the units-of-activity method of depreciation, the amount of depreciation expense for 2014 would be

Research and development costs

Which of the following is included in the cost of constructing a building?