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

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Question 61

True/False

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The cash-equivalent price of an asset received is measured as the fair value of the consideration given including cash,or the fair value of the asset received,whichever is more determinable.

A) True
B) False

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Question 62

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During 2019,a company purchased a mine at a cost of $3,000,000.The company spent an additional $600,000 getting the mine ready for its intended use.It is estimated that 300,000 tons of mineral can be removed from the mine and the residual value of the mine will be $600,000.During 2019,45,000 tons of mineral were removed from the mine and 35,000 tons were sold. Which of the following statements is incorrect with respect to the accounting for the mine?

A) The book value of the mine on December 31,2019 was $2,650,000.
B) The book value of the mine decreased $450,000 during 2019.
C) The inventory of minerals was $100,000 at December 31,2019.
D) The 2019 cost of goods sold was $350,000.

E) None of the above
F) A) and C)

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Question 63

Multiple Choice

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Which one of the following would not be recorded as an intangible asset?

Which of the following includes only intangible assets?

On January 1,2019,Woodstock,Inc.purchased a machine costing $40,000.Woodstock also paid $1,000 for transportation and installation.The expected useful life of the machine is 6 years and the residual value is $5,000. How much is the annual depreciation expense,assuming use of the straight-line depreciation method?

The book value of a depreciable asset equals its acquisition cost minus the depreciation expense recorded since the acquisition date.

Which of the following is most likely to be an intangible asset with an indefinite life?

Amanda Company purchased a computer that cost $10,000.It had an estimated useful life of five years and a residual value of $1,000.The computer was depreciated by the straight-line method and was sold at the end of the third year of use for $5,000 cash. Which of the following statements correctly describes the computer sale?

Gilbert Company made an ordinary repair to a delivery truck during 2019 at a cost of $500 and capitalized the repair cost.What is the effect on the 2019 financial statements as a result of the incorrect capitalization?

Smith Company exchanges assets to acquire a building.The market price of the Smith stock on the exchange date was $35 per share and the building's book value on the books of the seller was $250,000. Which of the following is incorrect for Smith Company when Smith issues 10,000 shares of $10 par value common stock and pays $20,000 cash in exchange for the building?

Which of the following includes only tangible assets?

The units-of-production method of depreciation allocates an asset's cost over its useful life based on the current period's production relative to its total estimated production.

Which of the following would most likely not be recorded as ordinary repairs and maintenance?

Landmark Restaurants reported net income of $45.9 million during Year 6.Landmark reported depreciation and amortization of plant and equipment of $48.8 million and cash paid for additions to property,plant,and equipment of $162.9 million during Year 6. Explain where each of these items would be reported and their impact on cash flows on the statement of cash flows (the indirect method is used to prepare the statement of cash flows).

If an expenditure related to a depreciable asset is incorrectly treated as a capital expenditure,instead of as repairs and maintenance expense,which of the following statements is true?

Which method of depreciation results in periodic depreciation expense that fluctuates from one period to the next,not necessarily in a steadily upward or downward direction?

Depreciation is the process of estimating a long-lived asset's current market value.

Which of the following would not be considered an intangible asset?

If a second-hand machine is purchased for productive use in a business,all renovation and repair costs on the used machine incurred by the purchaser prior to its productive use should be reported as part of the asset's cost on the balance sheet.

Warren Company plans to depreciate a new building using the double declining-balance depreciation method.The building cost is $800,000.The estimated residual value of the building is $50,000 and it has an expected useful life of 25 years. Assuming the first year's depreciation expense was recorded properly,what would be the amount of depreciation expense for the second year?