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Exam 10: Plant Assets, natural Resources, and Intangibles

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Question 1

Multiple Choice

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Cambria owns equipment that cost $93,500 with accumulated depreciation of $64,000.Cambria asks $35,000 for the equipment but sells the equipment for $33,000.The journal entry to record the disposal of the asset would involve all of the following except:

A) Debit Accumulated Depreciation $64,000.
B) Credit Equipment $93,500.
C) Debit Loss on Disposal of Equipment $3,500.
D) Credit Gain on Disposal of Equipment $3,500.
E) Debit Cash $33,000.

F) D) and E)
G) C) and E)

Correct Answer

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C

Question 2

Multiple Choice

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The formula for computing annual straight-line depreciation is:

A) Depreciable cost divided by useful life in units.
B) Cost plus salvage value divided by the useful life in years.
C) Cost less salvage value divided by the useful life in years.
D) Cost multiplied by useful life in years.
E) Cost divided by useful life in units.

F) A) and C)
G) A) and E)

Correct Answer

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C

Question 3

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A company sold for $40,000 cash a machine that originally cost $90,000.The accumulated depreciation on this machine was $47,000 at the time of the sale.What was the company's gain or loss on this sale?

Match each of the following terms with the appropriate definitions. -An exclusive right granted to its owner to manufacture and sell an item, or to use a process, for 20 years.

A company purchased a delivery van for $23,000 with a salvage value of $3,000 on September 1,Year 1.It has an estimated useful life of 5 years.Using the straight-line method,how much depreciation expense should the company recognize on December 31,Year 1?

A company purchased a truck on October 1 of the current year at a cost of $40,000.The truck is expected to last six years and has a salvage value of $2,200.The company's annual accounting period ends on December 31. 1.What is the depreciation expense for the current year,assuming the straight-line method is used? 2.What is the depreciation expense for the current year,assuming the double-declining-balance method is used?

When a company constructs a building,the cost of the building includes materials and labor,design fees,building permits,and insurance during construction.

The useful life of a plant asset is:

_____________________ refers to the insufficient capacity of a company's plant asset to meet the company's productive demands.

A new machine is expected to produce 600,000 units of product during its 8-year useful life.The machine cost $1,800,000 cash and it is estimated to have a $60,000 salvage value. 1.Calculate the depreciation if the machine produces 70,000 units of product during its first year,using the units-of-production method. 2.Calculate the depreciation on the machine using the double-declining-balance method. 3.Calculate the depreciation on the machine using the straight-line method.

Salta Company installs a manufacturing machine in its factory at the beginning of the year at a cost of $87,000.The machine's useful life is estimated to be 5 years,or 400,000 units of product,with a $7,000 salvage value.During its second year,the machine produces 84,500 units of product.What journal entry would be needed to record the machines' second year depreciation under the units-of-production method?

On April 1,2013,a company disposed of equipment for $14,200 cash that had cost $35,000 on January 1,2009.The equipment had a salvage value of $5,000,and a useful life 10 years.The double-declining-balance depreciation method was used.On December 31,2012,accumulated depreciation was $20,664.Prepare a journal entry to record depreciation for 2013 up to the date of disposal of the equipment,and prepare a journal entry to record the disposal of the equipment.

The cost of an intangible asset is systematically allocated to depreciation expense over its estimated useful life.

A company had a building destroyed by fire.The building originally cost $650,000,and its accumulated depreciation as of the date of the fire was $300,000.The company received $400,000 cash from an insurance policy that covered the building and will use that money to help rebuild.Prepare the single journal entry to record the destruction of the building and the receipt of cash from the insurance company.

A total asset turnover ratio of 3.5 indicates that:

Inadequacy refers to the insufficient capacity of a company's plant assets to meet the company's growing productive demands.

Many companies use an accelerated depreciation method because:

Match each of the following terms with the appropriate definitions. -The total cost of a plant asset less its accumulated depreciation.

The total cost of an asset less its accumulated depreciation is called:

Depletion: