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

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Question 71

Multiple Choice

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Which of the following would most likely not be recorded as ordinary repairs and maintenance?

A) Repairing the carpet in the sales department offices.
B) Repairing a leaky roof.
C) Putting a hydraulic lift on a delivery truck making it easier and quicker to deliver appliances.
D) Painting the exterior of the factory building.

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

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Question 72

Multiple Choice

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Failure to record amortization expense on a patent during the current year will result in which of the following?

A) Net income will be overstated, but there would be no effect on total assets.
B) Net income for the year and total assets would both be overstated.
C) Assets will be overstated, but there would be no effect on net income for the year.
D) Net income and assets will both be understateD.Failure to record patent amortization results in an understatement of expenses and therefore an overstatement of net income.Assets are overstated because the patent account was not reduced by the amortization that was not recorded.

E) B) and C)
F) None of the above

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Question 73

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The first step in recording the disposal of a long-lived asset is to update its book value by recognizing depreciation expense for the period of time since the last depreciation adjustment was made.

The systematic and rational allocation of the acquisition cost of natural resources to those periods in which the resources contribute to revenue is called depletion.

Salvia Company recently purchased a truck. The price negotiated with the dealer was $40,000. Salvia also paid sales tax of $2,000 on the purchase, shipping and preparation costs of $3,000, and insurance for the first year of operation of $4,000. At what amount should the truck be recorded on the balance sheet prior to recording depreciation expense?

Pier 5 has been in business 8 years with 4 stores in the San Francisco bay area. Its local reputation for making savory pies such as curried potatoes is well recognized. A national food distributor has offered to purchase the company. Pier 5 has $0.9 million of net assets at book value, but those net assets have a fair value of $1.2 million. If the distributor offers to buy Pier 5 for $3.5 million, how much will be recorded as goodwill based on the offered acquisition price?

Beckworth Company purchased a truck on January 1, 2015, at a cash cost of $10,600. The estimated residual value was $400 and the estimated useful life 4 years. The company uses straight-line depreciation computed monthly. On July 1, 2018, the company sold the truck for $1,900 cash. Required: A.What was the depreciation expense amount per month? B.What was the amount of accumulated depreciation at July 1, 2018? C.Prepare the required journal entries on the date of disposal, July 1, 2018.(Assume no 2018 depreciation had yet been recorded)

Which of the following equipment related costs is not capitalized on a balance sheet?

The cash-equivalent price of an asset received is measured as the fair value of the consideration given including cash, or the fair value of the asset received, whichever is more determinable.

Which of the following accounts would not be considered an intangible asset?

Prepare the required adjusting journal entry at December 31, 2016, the end of the annual accounting period for the three items below. Assume that no adjusting entries have been made during the year. If no entry is required, explain why. A.Polk Company acquired a patent that cost $6,000 on January 1, 2016.The patent was registered on January 1, 2012.The useful life of a patent is 20 years from registration. B.Polk Company acquired a gravel pit on January 1, 2016, that cost $24,000.The company estimates that 30,000 tons of gravel can be extracted economically.When all the gravel has been extracted, no residual value is anticipated.During 2016, 4,000 tons were extracted and sold. C.On January 1, 2016, Polk Company acquired a used dump truck that cost $6,000 to use hauling gravel.The company estimated a residual value of 10% of cost and a useful life 4 years.The company uses straight-line depreciation.