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Exam 9: Plant Assets, Natural Resources, and Intangible Assets

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Question 41

Multiple Choice

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Which of the following methods of computing depreciation is production based?

A) Straight-line
B) Declining-balance
C) Units-of-activity
D) None of these

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Question 42

True/False

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If an acquired franchise or license has an indefinite life, the cost of the asset is not amortized.

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Question 43

Multiple Choice

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Presto Company purchased equipment and these costs were incurred: $\begin{array} { l r } \text { Cash price } & \$ 22,500 \\\text { Sales taxes } & 1,800 \\\text { Insurance during transit } & 320 \\\text { Installation and testing } & 430 \\\text { Total costs } & \$ 25,050\end{array}$ Presto will record the acquisition cost of the equipment as

Depreciation

If a plant asset is sold at a gain, the gain on disposal should reduce the cost of goods sold section of the income statement.

Moreno Company purchased equipment for $450,000 on January 1, 2010, and will use the double-declining-balance method of depreciation.It is estimated that the equipment will have a 3-year life and a $20,000 residual value at the end of its useful life.The amount of depreciation expense recognized in the year 2012 will be

The declining-balance method of depreciation produces

All plant assets (fixed assets) must be depreciated for accounting purposes.

Management should select the depreciation method that

All of the following factors in computing depreciation are estimates except

The four subdivisions for plant assets are

In calculating depreciation, both plant asset cost and useful life are based on estimates.

Companies record a gain or loss on the exchange of plant assets because most exchanges have commercial substance.

Mott Company uses the units-of-activity method in computing depreciation.A new plant asset is purchased for $24,000 that will produce an estimated 100,000 units over its useful life.Estimated residual value at the end of its useful life is $2,000.What is the depreciation cost per unit?

The Accumulated Depletion account is deducted from the cost of the natural resource in the statement of financial position.

Recording depreciation each period is an application of the expense recognition principle.

The cost of land does not include

A plant asset cost $£ 192,000$ and is estimated to have a $£ 24,000$ residual value at the end of its 8-year useful life. The annual depreciation expense recorded for the third year using the double-declining-balance method would be

If the proceeds from the sale of a plant asset exceed its book value, a gain on disposal occurs.

Which of the following statement regarding depreciation is false?