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Exam 18: Property, Plant, and Equipment

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Question 31

True/False

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The salvage value is the value that the asset is expected to have at the end of its useful life.

A) True
B) False

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Question 32

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The entry to record amortization of the acquisition cost of an intangible asset includes a credit directly to the intangible asset account.

A) True
B) False

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Question 33

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Harrod's Landscape Artists acquired a new truck for $42,000 less the trade-in allowance of $6,000 for his old truck.The old truck was purchased for $31,000 and had a book value of $5,000 on the exchange date.The entry to record the acquisition of the new truck will include a debit to the Truck account for

Which of the following abides by the principle of conservatism regarding trade-ins?

Under federal income tax rules,neither gains or losses are recognized on trade-ins.

Cullen's Catering owns a delivery van which it depreciates applying the units-of-output method (units-of-production method).The original cost of the van was $44,000.When it was purchased in July of 2016,it was estimated that it would be driven for 125,000 miles over four years and then sold for an expected salvage value of $4,500.During 2016 the van was driven 17,230 miles.What is the depreciation expense for 2016? (Round final answer to the nearest whole dollar. )

C & T Company purchased a company that produced bottled water with fruit juice additives.The brand name for these products,Fruit Options,was well known and had a well-established customer base.At the time of purchase,January 2 of the current year,C & T valued this brand name at $250,000.The life of this intangible asset cannot be determined.However,it was assessed at the end of the year at the purchase price.The patent for the unique processing of the fruit juices had a remaining life of 8 years and an amount of $4,800 was recorded on the books for it.Prepare the journal entries for the amortization of these items at C & T's year end,June 30.

The amount of a long-term asset's impairment is

The entry to record the sale of equipment used in a business may include a debit to

The conservatism principle requires choosing a depreciation method which matches the cost of the asset to the periods when the asset provides benefits to the business.

All costs incurred as part of the asset's cost,including net purchase price,transportation costs,installation costs,and costs of adjustments or modifications are referred to as ___________ _____.

The allocation of the costs of natural resources,such as minerals,to the units produced is referred to as

The Modified Accelerated Cost Recovery System (MACRS)utilizes a half-year convention in calculating depreciation expense regardless of the asset purchase date.

Dom's Delivery purchased a van for $32,000.The transportation charges were $400,sales tax was $2,240,and the license cost $250.Special shelving was installed in the van for $4,300.In addition,Dom had the company name painted on the doors.This cost the company $1,250.The total cost of the van to record in the proper asset account is

When the sum-of-the-years'-digits method is used to depreciate an asset with a four-year life,the depreciation expense for the fourth year is computed by multiplying the difference between the cost and the salvage value by the fraction ___________________.

Selected transactions of the Harrel Company are listed below.The company uses the straight-line method of depreciation.Record the transactions on page 9 of a general journal.Omit descriptions.

In determining the impairment of a long-term asset,an accountant applies the _________________ test to compare the asset's net book value with estimated cash flows from the asset's future use.

Intangible assets may be purchased or developed.If developed,they are categorized as Research and Development and

When computing depreciation,the salvage value should be ignored if a company uses

An asset that cost $25,000 was sold for $9,000 cash.Accumulated depreciation on the asset was $16,000.The entry to record this transaction includes the recognition of