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Exam 10: Plant Assets, Natural Resources, and Intangibles

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Question 71

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Record the following events and transactions for Leonard Company for the current year. 1.On January 2,Leonard purchased a patent for $35,000 with a remaining useful life of 10 years.Prepare the journal entry to amortize the patent at the end of the first year. 2.On January 3,Leonard made an advance payment on a leasehold of $840,000.The leasehold expires in 15 years.Prepare the journal entry to amortize the leasehold at the end of the first year. 3.On January 4,Leonard purchased a music distributor's collection of lyrics and songs for $1,425,000.The copyrights have a remaining life of another 30 years.Prepare the journal entry to amortize the copyright at the end of the first year.

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Question 72

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A machine costing $450,000 with a 4-year life and an estimated salvage value of $30,000 is installed by Peters Company on January 1.The company estimates the machine will produce 1,050,000 units of product during its life.It actually produces the following units for the first 2 years: Year 1,260,000;Year 2,275,000.Enter the depreciation amounts for years 1 and 2 in the table below for each depreciation method.Show calculation of amounts below the table.

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Straight-line: $450,000- $30,000/4 = $1...

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Question 73

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Capital expenditures that extend an asset's useful life beyond its original estimate are called _______________________.

Crestfield leases office space for $7,000 per month.On January 3,the company incurs $12,000 to improve the leased office space.These improvements are expected to yield benefits for 10 years.Crestfield has 4 years remaining on its lease.What journal entry would be needed to record the expense for the first year related to the improvements?

A company purchased property for $100,000.The property included a building,a parking lot,and land.The building was appraised at $62,000;the land at $35,000,and the parking lot at $18,000.Land should be recorded in the accounting records with an allocated cost of:

_________________________ are capital expenditures that make a plant asset more productive but do not always increase an asset's life;they often involve adding a component to an asset or replacing one of its old components with a better one.

On April 1,Year 1,Raines Co.purchased and placed a plant asset in service.The following information is available regarding the plant asset: Make the necessary adjusting journal entries at December 31,Year 1,and December 31,Year 2 to record depreciation for each year under the double-declining balance depreciation method:

Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000.The machine's useful life is estimated to be 5 years,or 300,000 units of product,with a $15,000 salvage value.During its first year,the machine produces 64,500 units of product.What journal entry would be needed to record the machines' first year depreciation under the units-of-production method?

Beckman Enterprises purchased a depreciable asset on October 1,Year 1 at a cost of $100,000.The asset is expected to have a salvage value of $20,000 at the end of its five-year useful life.If the asset is depreciated on the double-declining-balance method,the asset's book value on December 31,Year 2 will be:

__________________ is an estimate of an asset's value at the end of its benefit period (or useful life).

The insufficient capacity of a company's plant asset to meet the company's productive demands is called ______________________.

On April 1,2015,due to obsolescence resulting from a new technology,a company discarded a computer that cost $5,000,had a useful life of 4 years,and a salvage value of $400.Based on straight-line depreciation,the accumulated depreciation as of December 31,2014 was $3,450. a.Prepare the journal entry to record depreciation up to the date of disposal of the computer. b.Prepare the journal entry to record the disposal of the computer.

The depreciation method that charges the same amount of expense to each period of the asset's useful life is called:

A company discarded a computer system originally purchased for $18,000.The accumulated depreciation was $17,200.The company should recognize a(an) :

The modified accelerated cost recovery system (MACRS) :

The useful life of a plant asset is:

A company purchased a tract of land for its natural resources at a cost of $1,500,000.It expects to mine 2,000,000 tons of ore from this land.The salvage value of the land is expected to be $250,000.If 150,000 tons of ore are mined during the first year,the journal entry to record the depletion is:

Suarez Company uses the straight-line method of depreciation.The company purchased a computer system on January 1,Year 1,for $1,600,000 with an expected life of six years and a salvage value of $130,000.Assuming the computer is sold on July 1,Year 3 for $1,000,000 cash,prepare the journal entries to record depreciation for the first 6 months of Year 3 and the sale of the computer.

A machine had an original cost of $60,000.After $45,000 of depreciation was recorded,the machine was traded in on a new machine priced at $75,000.A $10,500 trade-in allowance was received on the old machine and the balance of $64,500 was paid in cash.This transaction has commercial substance.Prepare the general journal entry to record this trade-in.

A company paid $320,000 for equipment that was expected to last five years and to have a salvage value of $40,000.During the third year of the equipment's life,$39,000 cash was paid for replacement parts that were expected to increase productivity by 10% each year.Prepare the journal entry to record the $39,000 cost incurred in the third year.