FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 10: Plant Assets, Natural Resoures, and Intangibles

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 31

Multiple Choice

Review LaterAdd Note

Review Later

Fortune Drilling Company acquires a mineral deposit at a cost of $5,900,000. It incurs additional costs of $600,000 to access the deposit, which is estimated to contain 2,000,000 tons and is expected to take 5 years to extract. Compute the depletion expense for the first year assuming 418,000 tons were mined.

A) $1,180,000.
B) $1,280,000.
C) $1,300,000.
D) $1,358,500.
E) $1,233,100.

F) A) and B)
G) A) and C)

Correct Answer

verified

Show Answer

Question 32

True/False

Review LaterAdd Note

Review Later

A company purchased a plant asset for $60,000. The asset has an estimated salvage value of $4,000, and an estimated useful life of 7 years. The annual depreciation expense using the straight-line method is $4,000 per year.

A) True
B) False

Correct Answer

verified

Show Answer

Question 33

True/False

Review LaterAdd Note

A plant asset's useful life is the length of time it is productively used in a company's operations.

The following information is available on a depreciable asset owned by Mutual Savings Bank: $\begin{array} { | l | l | } \hline \text { Purchase date } & \text { July } 1 , \text { Year } 1 \\\hline \text { Purchase price } & \$ 85,000 \\\hline \text { Salvage value } & \$ 10,000 \\\hline \text { Useful life } & 10 \text { years } \\\hline \text { Depreciation method } & \text { straight-line } \\\hline\end{array}$ The asset's book value is $70,000 on July 1, Year 3. On that date, management determines that the asset's salvage value should be $5,000 rather than the original estimate of $10,000. Based on this information, the amount of depreciation expense the company should recognize during the last six months of Year 3 would be:

Total asset turnover is used to evaluate:

Gain or loss on the disposal of assets is determined by comparing the disposed asset's book value to the market value of any assets received.

Riverboat Adventures pays $310,000 plus $15,000 in closing costs to buy out a competitor. The real estate consists of land appraised at $35,000, a building appraised at $105,000, and paddleboats appraised at $210,000. Compute the cost that should be allocated to the land.

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the units-of-production method. The company estimates it will use the machine for 5 years, during which time it anticipates producing 40,000 units. The machine is estimated to have a $4,000 salvage value. The company produces 9,000 units in year 1 and 6,000 units in year 2. Depreciation expense in year 2 is:

If an asset is sold above its book value, the selling company records a loss.

Natural resources are assets that include standing timber, mineral deposits, and oil and gas fields.

Match each of the appropriate definitions with correct terms.

Total asset turnover is calculated by dividing net sales by average total assets.

The depreciation method that produces larger depreciation expense during the early years of an asset's life and smaller expense in the later years is a(an) :

Plant assets refer to nonphysical assets that are used in the operations of a business.

Explain in detail how to compute each of the following depreciation methods: straight-line, units-of-production, and double-declining-balance.

A leasehold refers to the rights the lessor grants to the lessee under the terms of the lease.

A company paid $150,000, plus a 7% commission and $5,000 in closing costs for a property. The property included land appraised at $87,500, land improvements appraised at $35,000, and a building appraised at $52,500. What should be the allocation of this property's costs in the company's accounting records?

One characteristic of plant assets is that they are:

When a company constructs a building, the cost of the building includes materials and labor but not design fees, building permits, or insurance during construction.

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: