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Exam 9: Plant Assets, Natural Resources and Intangible Assets

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Question 1

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A patent

A) has a legal life of 40 years.
B) is nonrenewable.
C) can be renewed indefinitely.
D) is rarely subject to litigation because it is an exclusive right.

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Question 2

Multiple Choice

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In computing depletion, salvage value is

A) always immaterial.
B) ignored.
C) impossible to estimate.
D) included in the calculation.

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Question 3

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Using the units-of-activity method of depreciating factory equipment will generally result in more depreciation expense being recorded over the life of the asset than if the straight-line method had been used.

Kingston Company purchased a piece of equipment on January 1, 2021.The equipment cost $200,000 and has an estimated life of eight years and a salvage value of $25,000.What is the depreciation expense for the asset for 2022 under the double-declining-balance method?

All of the following intangible assets are amortized except

Enos Company has decided to change the estimate of the useful life of an asset that has been in service for two years.Which of the following statements describes the proper way to revise a useful life estimate?

If a fully depreciated plant asset is still used by a company, the

Engler Company purchases a new delivery truck for $55,000.The sales taxes are $4,000.The logo of the company is painted on the side of the truck for $1,600.The truck license is $160.The truck undergoes safety testing for $290.What does Engler record as the cost of the new truck?

All of the following factors in computing depreciation are estimates except

Depreciable cost is the

Once cost is established for a plant asset, it becomes the basis of accounting for the asset unless the asset appreciates in value, in which case, market value becomes the basis for accounting.

Farr Company purchased a new van for floral deliveries on January 1, 2021.The van cost $56,000 with an estimated life of five years and $14,000 salvage value at the end of its useful life.The double-declining-balance method of depreciation will be used.What is the depreciation expense for 2021?

The cost of natural resources is not allocated to expense because the natural resources are replaceable only by an act of nature.

On July 1, 2021, Jenks Company purchased the copyright to Jackson Computer tutorials for $324,000.It is estimated that the copyright will have a useful life of five years with an estimated salvage value of $24,000.The amount of Amortization Expense recognized for the year 2021 would be

Nicholson Company purchased equipment on January 1, 2019, for $80,000 with an estimated salvage value of $20,000 and an estimated useful life of eight years.On January 1, 2021, Nicholson decided the equipment will last 12 years from the date of purchase.The salvage value is still estimated at $20,000.Using the straight-line method, the new annual depreciation will be

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

A loss on the disposal of a plant asset are calculated the same way whether the asset is sold or retired.

Accountants do not attempt to measure the change in a plant asset's fair value during ownership because

On July 1, 2021, Hale Kennels sells equipment for $220,000.The equipment originally cost $600,000, had an estimated 5-year life and an expected salvage value of $100,000.The Accumulated Depreciation account had a balance of $350,000 on January 1, 2021, using the straight-line method.The gain or loss on disposal is

Mattox Company is building a new plant that will take three years to construct.The construction will be financed in part by funds borrowed during the construction period.There are significant architect fees, excavation fees, and building permit fees.Which of the following statements is true?