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Exam 8: Reporting and Interpreting Property,plant,and Equipment;intangibles;and Natural Resources

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Question 21

Multiple Choice

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Which of the following statements is false?

A) The book value at the end of an asset's useful life will be the same under all the depreciation methods allowed under GAAP.
B) The balance in the accumulated depreciation account will be the same at the end of an asset's useful life under all the methods allowed under GAAP.
C) Once a company selects a depreciation method,it must use this method for all depreciable assets.
D) The annual depreciation expense and year-end book values will differ under the various depreciation methods over the life of the asset.

E) All of the above
F) C) and D)

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Question 22

Multiple Choice

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On March 1,2019,Anniston Company purchased an oil well at a cost of $1,000,000.It is estimated that 150,000 barrels of oil can be produced over the remaining life of the well and the residual value of the well will be $100,000. During 2019,15,000 barrels of oil were produced and all of these barrels were sold.Which of the following statements is incorrect with respect to the accounting for the oil well?

A) The 2019 cost of goods sold was $90,000.
B) The book value of the oil well decreased $90,000 during 2019.
C) The inventory of oil was $90,000 at December 31,2019.
D) The depletion rate is $6.00 per barrel of oil.

E) All of the above
F) B) and C)

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Question 23

Multiple Choice

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Which of the following statements is incorrect?

A machine,acquired for a cash cost of $15,000,is being depreciated on a straight-line basis of $2,700 per year.The residual value was estimated to be 10% of cost.The estimated useful life is

Pier 5 has been in business 8 years with 4 stores in the San Francisco bay area.Its local reputation for making savory pies such as curried potatoes is well recognized.A national food distributor has offered to purchase the company.Pier 5 has $0.9 million of net assets at book value,but those net assets have a fair value of $1.2 million.If the distributor offers to buy Pier 5 for $3.5 million,how much will be recorded as goodwill based on the offered acquisition price?

Which of the following would not be classified as property,plant and equipment on a balance sheet?

Ordinary repairs and maintenance costs are incurred to maintain a long-lived productive asset and are expensed as incurred.

International Financial Reporting Standards (IFRS) allow accounting for tangible and intangible assets at fair value by:

On March 1,2019,Anniston Company purchased an oil well at a cost of $1,000,000.It is estimated that 150,000 barrels of oil can be produced over the remaining life of the well and the residual value of the well will be $100,000. During 2019,15,000 barrels of oil were produced and 10,000 barrels were sold.Which of the following statements is correct with respect to the accounting for the oil well?

What is the effect on the 2019 financial statements when a capital expenditure during 2019 was incorrectly recorded as a repairs and maintenance expense?

Depreciation is the process of allocating a long-lived asset's cost over its productive life.

A company purchased equipment for $800,000 and has depreciated it using the straight-line method for the past 5 years when its original life was estimated to be 10 years with a $200,000 residual value.The equipment's utility to the company has declined because management expects the equipment to generate net cash flows over the remaining years of $300,000.The asset's fair value at the end of the fifth year is $200,000. If the asset has been impaired,record the journal entry to record the impairment.

On January 1,2018,Boston Company purchased a heavy duty machine having an invoice price of $13,000.Boston paid transportation and installation costs totaling $3,000.The machine is estimated to have a 4-year useful life and a $1,400 residual value. Calculate depreciation expense and book value for 2018-2021,assuming double declining-balance method of depreciation.

Augie Corporation purchased a truck at a cost of $60,000.It has an estimated useful life of five years and estimated residual value of $5,000.At the beginning of year three,Augie's managers concluded that the total useful life would be four years,rather than five years.There was no change in the estimated residual value.What is the amount of depreciation that Augie should record for year 3 under the straight-line depreciation method?

A company has some bottling equipment which cost $8.5 million,has a net book value of $4.1 million,estimated future cash flows of $3.7 million,and a fair value of $3.1 million. Which of the following correctly describes the recording of the asset impairment loss?

Which of the following statements is incorrect?

Which of the following statements is correct with respect to a loss on the sale of a depreciable asset?

Which of the following is correct when recording the disposal of equipment for a gain?

Which of the following is correct?

Selling a depreciable asset for a gain results in an increase in both net income and assets.