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Exam 18: Property, Plant, and Equipment

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Question 61

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For federal income tax purposes,the depletion expense deducted from income is the larger of cost depletion or ___________.

A) amount per table provided with forms
B) percentage depletion
C) units-of-output times the calculated rate per unit
D) number of units extracted times the calculated rate per unit

E) None of the above
F) All of the above

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Question 62

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DJG Corporation purchased land in order to build new corporate headquarters for a purchase price of $758,000.The lawyers charged $2,500 to handle the legal aspects of the purchase.Closing costs paid by DJG amounted to $15,160.There was an old factory and warehouse on the property that cost DJG $7,500 to have removed.In addition,CSB Construction charged the corporation $1,800 to grade the property to ensure proper drainage and an additional $15,800 build a drive,parking lot,and walkways.What amount should be recorded as Land? What other account(s)should be increased and for what amount(s)?

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Land is increased (debited)for...

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Question 63

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The cost of land is not depreciated.

When the units-of-output method is used to compute depreciation,the useful life of an asset is the number of units of work the asset will perform.

Patents,trademarks,and copyrights are examples of ____________________ assets.

Depreciation refers to the decrease in the market value of an asset.

The adjusting entry to record depletion for the period includes a credit to the Depletion Expense account.

Each year an intangible asset is assessed to estimate its value which is then compared to the existing book value in order to determine if impairment must be recorded.

Modern Products Company purchased new packaging equipment for $245,000 on January 1,2016.The equipment is expected to be used for 6 years,or 60,000 operating hours.It has an estimated salvage value of $5,000.The equipment was used for 10,000 hours in 2016,15,000 hours in 2017,and 12,000 hours in 2018. Compute annual depreciation expense for the first three years,using the straight-line method,the double-declining balance method,and the units of output method.

Amortization is the process of allocating the cost of natural resources to expense over the period in which the resource produces revenue.

Equipment that cost $20,000 was sold for $12,000 cash.Accumulated depreciation on the asset was $14,000.The entry to record the sale includes a credit to the Equipment account for

Explain MACRS by creating a list of its characteristics.Include the type of depreciation method it is,when it is required,how property is classified,etc.

ARB Company purchased several pieces of equipment on January 2,2016.Office Furniture cost the company $16,000,has an estimated useful life of ten years,at which time they expect to sell it for a total of $500.Office Equipment was also purchased for a total of $10,750 and has an estimated useful life of five years.They don't expect it to have any residual value at the end of that time. Using the information shown,calculate the depreciation for 2016,2017,and 2018 under the double-declining-balance method (DDB).

The difference between the acquisition cost of an asset and its accumulated depreciation is called the ___________________.

The process by which the cost of natural resources extracted are allocated is

Which method of depreciation is not acceptable for financial accounting purposes?

The modified accelerated cost recovery system (MACRS)is acceptable for financial accounting purposes because it matches the costs of assets with the revenues produced by those assets.

Which of the following is NOT a class under MACRS for personal property?