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Exam 8: Operating Assets: Property, Plant, and Equipment, and Intangibles

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Question 31

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Chambersburg Corp. The following information is for Chambersburg Corp.for 2018 and 2017.Chambersburg uses the straight-line depreciation method. $\begin{array} { l r r } & \underline { \mathbf { 2 0 1 8 } } & \underline { \mathbf { 2 0 1 7 } } \\\text { Property, plant, and equipment } & \$ 250,000 & \$ 190,000 \\\text { Accumulated depreciation } & 100,000 & 85,000 \\ \text { Depreciation expense } & 62,500 & 47,500 \\\text { Net sales } & 1,000,000 & 900,000 \\\text { Average total assets }& 625,000 & 475,000\end{array}$ -Refer to the information for Chambersburg Corp. ? Using the 2018 data,what is the average life of Chambersburg's property,plant,and equipment (rounded to one decimal place) ?

A) 1.6 years
B) 2.5 years
C) 4.0 years
D) 10.0 years

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Question 32

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Goodwill can be recorded as an asset when a(n)

A) business has above normal profitability compared to other businesses in its industry.
B) business can determine that it has created customer goodwill and name recognition.
C) offer is received to purchase the business at a price in excess of the value of the assets.
D) business is purchased and payment is made in excess of the value of the net assets.

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Question 33

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Oakland Corp.purchased land and a building for a combined cost of $500,000.Oakland must

Waxman Company purchased a patent for $170,000 at the beginning of 2017 and estimated that its expected useful life was ten years.The patent has a legal life of 17 years.What amount should be recorded as amortization expense for the patent in 2017?

Acquisition cost includes all of the costs that are normal and necessary to acquire and maintain a plant asset over its useful life.

On January 2,2017,Hannah Company sold a machine for $1,000 that it had used for several years.The machine cost $12,000 and had accumulated depreciation of $9,000 at the time of sale.What gain or loss will be reported on the income statement for the sale of the machine?

Depreciation does not describe the increase or decrease in the market value of the asset.

On December 1,2017,Xeon Company bought land and an accompanying warehouse from Yen Company for $800,000.The fair market values of the land and the building at the time of purchase were $700,000 and $300,000,respectively.How much of the purchase price should Xeon Company allocate to the land,and how much should be allocated to the building?

Operating assets with no physical properties are called

Hu Corporation Use the following Assets section of Hu Corporation's balance sheets for the years ended December 31,2018 and 2017 to answer the questions that follow. ​ Hu Corporation recorded depreciation expense of $344 million for 2017. -Refer to the information for Hu Corporation. ? Required Calculate the following ratios for Hu for 2018. A.Average life of property,plant,and equipment B.Average age of property,plant,and equipment C.What information do these ratios provide to investors and creditors?

Borden Company incurred the following costs to acquire and prepare land for a new parking lot: purchase price for land,cost to clear the land,cost of paving,lighting for the parking lot,and landscaping for the parking lot.How should the company determine which costs should be recorded as Land Improvements and which cost should be recorded as Land?

Racer Company acquired patent rights on January 1,2014,for $1,080,000.The patent has a useful life equal to its legal life of 15 years.On January 2,2017,Racer successfully defended the patent in a lawsuit at a cost of $78,000. Required (1) Determine the patent amortization expense for the current year ended December $31,2017$ . (2) Analyze the impact of the adjusting entry to recognize the amortization.

For each of the following sentences ,select the word or group of words that best completes the statement. $\begin{array} { l l } \text { Patent } & \text { Copyright } \\\text { Goodwill } & \text { Revenue expenditure } \\\text { Natural resources } & \text { Research and development costs } \\\text { Trademark } & \text { Capital expenditure }\end{array}$ -_______________ is(are)a cost(s)that improves an operating asset and is (are)added to the asset account.

Wexford Co. Wexford Co. purchased a new delivery truck at the beginning of 2017. The truck has a cost of $37,000, an estimated life of five years, and an estimated residual value of $7,000. A full year's depreciation expense is to be recorded in 2017. The truck was driven 20,000 miles during 2017 and 24,000 miles during 2018. The number of expected miles over five years is 100,000. -Refer to the information about Wexford Co. Wexford Co.wants to use the depreciation method that will result in the highest depreciation expense for 2017.Which method should be used?

Chambersburg Corp. The following information is for Chambersburg Corp.for 2018 and 2017.Chambersburg uses the straight-line depreciation method. $\begin{array} { l r r } & \underline { \mathbf { 2 0 1 8 } } & \underline { \mathbf { 2 0 1 7 } } \\\text { Property, plant, and equipment } & \$ 250,000 & \$ 190,000 \\\text { Accumulated depreciation } & 100,000 & 85,000 \\ \text { Depreciation expense } & 62,500 & 47,500 \\\text { Net sales } & 1,000,000 & 900,000 \\\text { Average total assets }& 625,000 & 475,000\end{array}$ -Refer to the information for Chambersburg Corp. ? Between 2017 and 2018,Chambersburg sold some equipment that had an original cost of $57,500.Which statement is most likely true concerning transactions that must have occurred during the period?

When plant assets are reported,the current period's depreciation expense is subtracted from the original cost on the balance sheet.

Which statement is true concerning operating assets?

Lenders are interested in the value of operating assets as collateral when making lending decisions.

Please complete the following sentences: a.Accumulated amortization is used with _______________. b.Accumulated depreciation is used with _______________.

A change in estimate should be recorded __________.