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Exam 8: Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

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Question 41

Multiple Choice

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International Financial Reporting Standards (IFRS) allow accounting for tangible and intangible assets at fair value by:

A) Reapplication.
B) Reconsideration.
C) Revaluation.
D) Appraisalization.

E) B) and C)
F) All of the above

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Question 42

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A company purchased equipment for $800,000 and has depreciated it using the straight-line method for the past 5 years when its original life was estimated to be 10 years with a $200,000 residual value. The equipment's utility to the company has declined because management expects the equipment to generate net cash flows over the remaining years of $300,000. The asset's fair value at the end of the fifth year is $200,000. Required: If the asset has been impaired, record the journal entry to record the impairment.

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Annual straight-line depreciation expens...

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Question 43

Multiple Choice

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Williams Company purchased a machine costing $25,000 and is depreciating it over a 10-year estimated useful life with a residual value of $3,000. At the beginning of the eighth year, a major overhaul on it was completed at a cost of $8,000, and the total estimated useful life was changed to 12 years with the residual value unchanged. How much is the year 8 depreciation expense assuming use of the straight-line depreciation method?

On January 1, 2016, equipment was purchased for $80,000; the equipment's estimated residual value is $15,000, and its estimated useful life is 10 years. For 2016, the depreciation expense under the double-declining balance method is $13,000.

On January 1, 2016, equipment was purchased for $100,000. The equipment's estimated residual value is $20,000, and its estimated useful life is 8 years. On December 31, 2016, the book value using the straight-line method of depreciation is $90,000.

On January 1, 2016, Wasson Company purchased a delivery vehicle costing $40,000. The vehicle has an estimated 6-year life and a $4,000 residual value. What is the vehicle's book value as of December 31, 2017, assuming Wasson uses the straight-line depreciation method?

Which of the following is not true regarding certain assets?

Schager Company purchased a computer system on January 1, 2016, at a cash cost of $25,000. The estimated useful life is 10 years, and the estimated residual value is $3,000. The company will use the double declining-balance depreciation method. How much is the 2017 depreciation expense?

When determining cash flow from operating activities using the indirect method, depreciation and amortization expense are deducted from net income.

Which of the following does not properly describe the depreciation process?

On August 1, Red Company purchased computer equipment for $10,000 cash and also gave 100 shares of White common stock that Red Company held as an investment. The White common stock cost Red Company $5,000 and on August 1 had a fair value of $4,200. The installation costs for the computer equipment were $700 and shipping costs were $500. What amount should be the total amount debited to the computer equipment account?

Spa Sources Corporation purchased a machine that had an original cost of $60,000 and an estimated residual value of $10,000. The useful life was expected to be 8 years and straight-line depreciation is used. At the end of 2016, the book value of the machine was $35,000. Spa Sources sold the machine for $32,000 cash on October 1, 2017. Required: A.Prepare the journal entry to record depreciation for 2017 up to the date of sale. B.Prepare the journal entry to record the sale of the machine.

Which of the following statements is correct?

Which of the following best describes the objective of depreciation?

On March 1, 2016, Anniston Company purchased an oil well at a cost of $1,000,000. It is estimated that 150,000 barrels of oil can be produced over the remaining life of the well and the residual value of the well will be $100,000. During 2016, 15,000 barrels of oil were produced and 10,000 barrels were sold. Which of the following statements is correct with respect to the accounting for the oil well?

If a second-hand machine is purchased for productive use in a business, all renovation and repair costs on the used machine incurred by the purchaser prior to its productive use should be reported as part of the asset's cost on the balance sheet.

On March 1, 2016, Anniston Company purchased an oil well at a cost of $1,000,000. It is estimated that 150,000 barrels of oil can be produced over the remaining life of the well and the residual value of the well will be $100,000. During 2016, 15,000 barrels of oil were produced and all of these barrels were sold. Which of the following statements is incorrect with respect to the accounting for the oil well?

Which of the following includes only tangible assets?

The Wilson Company has provided the following information: • Net sales, $200,000 • Net operating income, $40,000 • Net income, $20,000 • Average total assets, $125,000 • Average net fixed assets; $80,000 What is Wilson's fixed asset turnover ratio?

A machine, acquired for a cash cost of $15,000, is being depreciated on a straight-line basis of $2,700 per year. The residual value was estimated to be 10% of cost. The estimated useful life is