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Exam 9: Plant Assets, natural Resources, and Intangibles

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Question 31

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A company's accountant capitalized a payment that should have been recorded as a revenue expenditure.How will this error affect the company's financial statements?

A) Net income will be understated.
B) Expenses will be overstated.
C) Assets will be overstated.
D) Liabilities will be overstated.

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

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Question 32

Multiple Choice

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Equipment was acquired for $210,000 and has accumulated depreciation of$93,000.The business exchanges this equipment for new equipment.The new equipment has a market value of $304,000 and the business pays $52,000 cash.Assume the exchange has commercial substance.The exchange results in ________.

A) loss $135,000
B) gain $187,000
C) gain $135,000
D) loss $187,000

E) None of the above
F) All of the above

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Question 33

Multiple Choice

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An asset was purchased for $31,000 on January 1,2016.The asset's estimated useful life was five years,and its residual value was $8,000.The straight-line method of depreciation was used.Calculate the gain or loss if the asset is sold for $21,000 on December 31,2016,the last day of the accounting period.

The useful life of a plant asset is the length of the service period expected from the asset.

On January 1,2017,Real Planes Manufacturing Corporation purchased a machine for $40,000,000.The corporation expects to use the machine for 24,000 hours over the next six years.The estimated residual value of the machine at the end of the sixth year is $40,000.The corporation used the machine for 3,600 hours in 2017 and 5,000 hours in 2018.What is the book value of the machine at the end of year 2018 if the corporation uses double-declining-balance method of depreciation? (Round your intermediate calculations. )

A business that has a vacant building that is not currently being used would classify the building as a plant asset.

Charlie Corp sold a truck for $15,000 cash.It was originally purchased for $50,000 and had accumulated depreciation of $30,000 at the time of sale.Prepare the journal entry for the sale of truck.

Hastings Corporation has purchased a group of assets for $25,000.The assets and their relative market values are listed below. $\begin{array} { | l | r | } \hline \text { Land } & \$ 6,800 \\\hline \text { Equipment } & 2,900 \\\hline \text { Building } & 3,800 \\\hline\end{array}$ Which of the following amounts would be debited to the Land account? (Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar. )

On January 1,2017 Hillop,Inc.had total assets of $369,000.During the year,the company purchased new machinery worth $90,000 and promised to pay the amount due after two years.Throughout the year,it earned revenue of $59,000 every month.Calculate the asset turnover ratio.

Clayton,Inc.purchased a van on January 1,2016,for $850,000.Estimated life of the van was five years,and its estimated residual value was $91,000.Clayton uses the straight-line method of depreciation.At the beginning of 2018,the company revised the total estimated life of the asset from five years to four years.The estimated residual value remained the same as estimated earlier.Calculate the depreciation expense for 2018.

The cost of an asset is $1,000,000,and its residual value is $290,000.Estimated useful life of the asset is five years.Calculate depreciation for the first year using the double-declining-balance method of depreciation.

On January 1,2017,Anodel,Inc.acquired a machine for $1,010,000.The estimated useful life of the asset is five years.Residual value at the end of five years is estimated to be $62,000.Calculate the depreciation expense per year using the straight-line method.

When a business sells a plant asset for book value,a gain or loss should be recorded.

When a company makes an accounting change,Generally Accepted Accounting Principles require that the company make changes to financial statements of prior years.

A plant asset is fully depreciated when the book value is ________.

Which of the following is an asset that represents distinctive identifications of a product or service?

Businesses record goodwill ________.

Prinkle Corporation purchased equipment for $60,000 on January 1,2016.On December 31,2018,the equipment was sold for $28,000.Accumulated Depreciation as of December 31,2018 was $31,000. Calculate gain or loss on the sale.

Regarding impairment of intangible assets,which of the following statements is incorrect?

Nobells Corp.has acquired land and paid $500 as brokerage to acquire the land.However,the company's accountant has recorded the $500 as a revenue expenditure.What is the effect of this error?