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Exam 9: Plant Assets, natural Resources, and Intangibles

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Question 21

True/False

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When a corporation uses the straight-line method of depreciation,the amount of depreciation charged to expense will be reduced from year to year.

A) True
B) False

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Question 22

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Steel Rolling Corp.purchased a mine on January 1,2015,for $500,000 and it is estimated to contain 30,000 tons of iron ore.There is no residual value.The corporation has extracted 2,500 tons of ore in 2015 and 3,800 tons of ore in 2016.What is depletion expense for 2016? (Do not round your intermediate calculations) .

A) $33,333
B) $42,667
C) $63,333
D) $63,667

E) A) and D)
F) None of the above

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Question 23

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Which of the following accounting methods is usually used to compute amortization expense?

On October 1,2015,Nurix Inc.purchased a patent for $200,000 cash.Although the patent gives legal protection for 20 years,the patent is expected to be used for only 10 years.Journalize the amortization expense for 2015.Assume straight-line amortization.

A lump-sum purchase or basket purchase involves paying a single price for several assets as a group.

The cost principle requires a business to record the assets acquired or services received at their actual cost.

An exchange transaction is said to have commercial substance if the future cash flows change as a result of the transaction.

In 2015,a corporation purchased a small business for $250,000.The market value of the small business's assets was $400,000,and the market value of the liabilities was $200,000.The corporation recorded goodwill of $50,000 at the time of acquisition.At the end of 2016,it measured the goodwill and found it had a remaining fair value of only $20,000.At year-end 2016,the corporation will ________.

Rightz Petroleum Products owns furniture that was purchased for $20,000.Accumulated depreciation is $16,000.The furniture was sold for $3,800.Give journal entry to record the transaction.

Which of the following is included in the cost of a plant asset?

According to generally accepted accounting principles,if the fair value of goodwill decreases below book value,an impairment loss must be recorded.

Depreciation is the allocation of a plant asset's cost to expense over the useful life of the asset.

The process by which businesses spread the allocation of an intangible asset's cost over its useful life is referred to as amortization.

Steel Rolling Corp.purchased a mine on Jan 1,2015 for $500,000 and it is estimated to contain 30,000 tons of iron ore.There is no residual value.The corporation has extracted 2,500 tons of ore in 2015 and 3,800 tons of ore in 2016.What is the book value of the mine at the end of 2016? (Do not round your intermediate calculations.)

In exchanges of plant assets with commercial substance,the new asset received will be recorded at its market value.

Businesses are allowed to record goodwill ________.

Nobells Corporation has acquired a property that included both land and a building for $500,000.The corporation paid cash.The corporation hired an appraiser who has determined that the market value of the land is $300,000 and that of the building is $400,000.Journalize the lump-sum purchase.

On June 30,2015,Adilide Inc.discarded equipment costing $40,000.Accumulated Depreciation as of December 31,2014,was $25,000.Assume annual depreciation on the equipment is $2,500.Journalize the partial year depreciation expense and disposal of the equipment.

When a plant asset is sold for a price lower than its book value,there will be a gain.

On January 1,2015,Anodel Inc.acquired a machine for $1,000,000.The estimated useful life of the asset is 5 years.The residual value at the end of 5 years is estimated to be $50,000.What is the book value of the machine at the end of 2016,if the company uses the straight-line method of depreciation?