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Exam 10: Plant Assets, Natural Resources, and Intangible Assets

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Question 121

Multiple Choice

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In an exchange of plant assets that has commercial substance, any difference between the fair market value and the book value of the old plant asset is

A) recorded as a gain or loss.
B) recorded if a gain but is deferred if a loss.
C) recorded if a loss but is deferred if a gain.
D) deferred if either a gain or loss.

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Question 122

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Research and development costs which result in a successful product which is patentable are charged to the Patent account.

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Question 123

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In recording the purchase of a business, goodwill should be recorded for the excess of ______________ over the _______________ of the net assets acquired.

In recording the acquisition cost of an entire business,

On January 1, 2008 Marsh Company purchased and installed a telephone system at a cost of $20,000. The equipment was expected to last five years with a salvage value of $3,000. On January 1, 2009 more telephone equipment was purchased to tie-in with the current system for $10,000. The new equipment is expected to have a useful life of four years. Through an error, the new equipment was debited to Telephone Expense. Marsh Company uses the straight-line method of depreciation. Instructions Prepare a schedule showing the effects of the error on Telephone Expense, Depreciation Expense, and Net Income for each year and in total beginning in 2009 through the useful life of the new equipment.

Recording depreciation each period is necessary in accordance with the

A company exchanges its old office equipment and $40,000 for new office equipment. The old office equipment has a book value of $28,000 and a fair market value of $20,000 on the date of the exchange. The cost of the new office equipment would be recorded at

Each of the following is used in computing revised annual depreciation for a change in estimate except

An exchange of plant assets has commercial substance if the future cash flows change as a result of the exchange.

Additions and improvements

A factory machine was purchased for $75,000 on January 1, 2010. It was estimated that it would have a $15,000 salvage value at the end of its 5-year useful life. It was also estimated that the machine would be run 40,000 hours in the 5 years. The company ran the machine for 4,000 actual hours in 2010. If the company uses the units-of-activity method of depreciation, the amount of depreciation expense for 2010 would be

The paneling of the body of an open pickup truck would be classified as a(n)

A truck that cost $36,000 and on which $30,000 of accumulated depreciation has been recorded was disposed of for $9,000 cash. The entry to record this event would include a

Andy's, a popular pizza hang-out, has a thriving delivery business. Andy's has a fleet of three delivery automobiles. Prior to making the entry for this year's depreciation expense, the subsidiary ledger for the fleet is as follows: Instructions (a) Determine the depreciation rates per mile for each car. (b) Determine the Depreciation Expense for each car for the current year. (c) Make one compound journal entry to record the annual Depreciation Expense for the fleet.

The cost of a purchased building includes all of the following except

A patent

The allocation of the cost of an asset to expense over its useful life is called _________________ for tangible plant assets, ________________ for natural resources, and _________________ for intangible assets.

The depreciable cost of a plant asset is its original cost minus obsolescence.

During 2010, Stein Corporation reported net sales of $3,000,000 and net income of $1,800,000. Stein also reported beginning total assets of $1,000,000 and ending total assets of $1,500,000. Stein's asset turnover ratio is

Intangible assets