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

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Question 161

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

A) True
B) False

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Question 162

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Which of the following statements concerning IFRS and U.S. GAAP is true?

A) IFRS permits revaluation of all intangible assets, whereas U.S. GAAP prohibits revaluation of intangible assets.
B) Gains on exchange of assets when the exchange has commercial substance are recognized under both IFRS and U.S. GAAP.
C) Changes in depreciation method under IFRS are reported in current and future periods, under U.S. GAAP such changes are treated as prior period adjustments.
D) All of these answer choices are correct.

E) A) and D)
F) None of the above

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Question 163

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Identify the following expenditures as capital expenditures or revenue expenditures. (a) Replacement of worn out gears on factory machinery. (b) Construction of a new wing on an office building. (c) Painting the exterior of a building. (d) Oil change on a company truck. (e) Replacing a computer chip with a larger chip, which increases productive capacity. No extension of useful life expected. (f) Overhaul of a truck motor. One year extension in useful life is expected. (g) Purchased a wastebasket at a cost of $10. (h) Painting and lettering of a used truck upon acquisition of the truck.

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

Eckman Company purchased equipment for $80,000 on January 1, 2013, and will use the double-declining-balance method of depreciation. It is estimated that the equipment will have a 5-year life and a $4,000 residual value at the end of its useful life. The amount of depreciation expense recognized in the year 2015 will be

A gain or loss on disposal of a plant asset is determined by comparing the

Comment on the validity of the following statements: "As an asset loses its ability to provide services, cash needs to be set aside to replace it. Depreciation accomplishes this goal."

A term that is not synonymous with property, plant, and equipment is

Using the units-of-activity method of depreciating factory equipment will generally result in more depreciation expense being recorded over the life of the asset than if the straight-line method had been used.

The "Revaluation Surplus" account that results from a revaluation of plant assets to fair value is reported on the statement of financial position as a contra account to the plant asset that was revalued.

On October 1, 2014, Holt Company places a new asset into service. The cost of the asset is $120,000 with an estimated 5-year life and $30,000 residual value at the end of its useful life. What is the book value of the plant asset on the December 31, 2014, statement of financial position assuming that Holt Company uses the double-declining-balance method of depreciation?

The cost of a new asset acquired in an exchange that has commercial substance is the cash paid plus the

The depreciable cost of a plant asset is its original cost minus obsolescence.

On July 1, 2014, Hale Kennels sells equipment for $110,000. The equipment originally cost $300,000, had an estimated 5-year life and an expected residual value of $50,000. The accumulated depreciation account had a balance of $175,000 on January 1, 2014, using the straight-line method. The gain or loss on disposal is

A loss on disposal of a plant asset can only occur if the cash proceeds received from the asset sale is less than the asset's book value.

Which of the following is disclosed in the statement of financial position or the notes to the financial statements?

Which of the following is not an intangible asset arising from a government grant?

Identify the factors that are considered in classifying an expenditure as a capital or a revenue expenditure. Are there instances where it may be difficult to classify an expenditure as one or the other ? What basis would be used in a decision?

Farr Company purchased a new van for floral deliveries on January 1, 2014. The van cost €48,000 with an estimated life of 5 years and €12,000 residual value at the end of its useful life. The double-declining-balance method of depreciation will be used. What is the balance of the Accumulated Depreciation account at the end of 2015?

Mattox Company is building a new plant that will take three years to construct. The construction will be financed in part by funds borrowed during the construction period. There are significant architect fees, excavation fees, and building permit fees. Which of the following statements is true?