Plant Assets And Depreciation Chap 10

Land does not decline in service potential over the course of its useful life because it is a fixed asset that is not subject to wear and tear or obsolescence. Unlike equipment, furnishings, and fixtures, which may deteriorate or become outdated over time, land retains its value and can continue to be used for various purposes indefinitely. Therefore, land is considered a non-depreciable asset.

Depreciation is a process of cost allocation. It involves spreading the cost of an asset over its useful life, reflecting the decrease in its value over time. This allows businesses to match the expense of using the asset with the revenue it generates. By allocating the cost of the asset over its useful life, depreciation helps in accurately determining the financial performance and profitability of a company. It is an important accounting concept that ensures the proper recognition of expenses and the accurate reporting of financial statements.

The correct answer is $45,000 should be debited to Land Improvements. This is because the cost of both the paving and the lights should be recorded as improvements to the land, rather than directly debiting the Land account. The Land Improvements account is used to track the costs associated with enhancing the land's value or usefulness, such as adding parking lots or landscaping. Therefore, the total cost of $45,000 should be debited to the Land Improvements account.

The cost of the equipment should be recorded as $25,800 because it includes the cash price of $24,000, sales taxes of $1,200, insurance during transit of $200, and installation and testing costs of $400. This total cost represents the actual amount that the company paid for the equipment, including all associated expenses.

The company's asset turnover can be calculated by dividing the net sales by the average total assets. In this case, the net sales are $180,000 and the average total assets can be calculated by adding the beginning total assets ($200,000) and the ending total assets ($300,000) and dividing by 2, resulting in $250,000. Dividing the net sales by the average total assets gives us $180,000/$250,000 = 0.72. Therefore, the company's asset turnover is 0.72.

The correct answer is "property, plant, equipment, and land." This answer includes all the necessary subdivisions for plant assets, which are property, plant, equipment, and land. It covers all the different types of assets that fall under the category of plant assets, including both tangible assets like buildings and equipment, as well as land.

In exchanges of assets that have commercial substance, both gains and losses are recognized immediately. This means that any increase or decrease in the value of the assets being exchanged is accounted for and reflected in the financial statements at the time of the exchange. This recognition allows for a more accurate representation of the financial position and performance of the entity involved in the exchange. It also ensures that the financial statements provide relevant and reliable information to users.

The terms "franchise" and "depreciation" are not related because depreciation is the allocation of the cost of a tangible asset over its useful life, while a franchise is an intangible asset that represents a legal agreement between a franchisor and a franchisee. Depreciation is not applicable to intangible assets like franchises, so the two terms are not related.

Additions to plant assets are considered capital expenditures because they involve the acquisition or improvement of long-term assets that will benefit the company for an extended period of time. These additions are not considered regular expenses and are not immediately expensed on the income statement. Instead, they are recorded as an increase in the value of the plant assets on the balance sheet, which helps to accurately reflect the company's investment in its long-term productive assets.

This statement is true because the balance sheet is a financial statement that provides an overview of a company's financial position, including its assets. The totals of major classes of assets, such as current assets, property, plant, and equipment, and intangible assets, can be shown in the balance sheet. However, the specific details of these assets, including any intangible assets, are typically disclosed in the notes to the financial statements. This allows for a more detailed understanding of the company's assets and their value.

Research and development costs are typically expensed when incurred, regardless of whether they result in a successful patent. This is because research and development costs are considered to be uncertain and speculative in nature, and therefore cannot be reliably measured or matched to future benefits. However, if a successful patent is obtained as a result of the research and development expenditures, the costs associated with obtaining and defending the patent can be capitalized and amortized over the useful life of the patent.

The correct answer is ( $10,000/ total estimated activity) x units of activities for 2013 and 2014. This is because the balance in accumulated depreciation at December 31, 2014, is being computed, so it should include the units of activity for both 2013 and 2014. The formula uses the cost of the truck ($10,000) divided by the total estimated activity to determine the depreciation per unit of activity, which is then multiplied by the units of activity for 2013 and 2014 to calculate the balance in accumulated depreciation.

When there is a change in estimated depreciation, it is necessary to revise both the current and future years' depreciation. This is because the change in estimated depreciation affects the overall depreciation expense for the asset, which should be reflected in both the current and future periods. By revising both the current and future years' depreciation, the financial statements will accurately represent the impact of the change in estimated depreciation on the company's financial performance.

The acquisition cost of the land is recorded as $99,770. This is calculated by adding the cash paid for the land ($96,000) to the additional costs incurred for the removal of shed ($300), filling and grading ($1,500), salvage value of lumber of shed ($120), broker commission ($1,530), paving of parking lot ($10,000), and closing costs ($560).

Under the double-declining-balance method, the depreciation expense for an asset is calculated by multiplying the straight-line depreciation rate (2 divided by the useful life) by the book value of the asset at the beginning of the period. In this case, the straight-line depreciation rate is 2/8 = 0.25, and the book value at the beginning of 2015 is $60,000 - $6,500 (depreciation expense for 2014) = $53,500. Therefore, the depreciation expense for 2015 is $53,500 * 0.25 = $13,375. However, the double-declining-balance method requires that the depreciation expense be reduced to the salvage value in the final year. Since the salvage value is $8,000 and the asset has a useful life of 8 years, the depreciation expense for 2015 is reduced to $8,000 - $6,500 (depreciation expense for 2014) = $1,500. Therefore, the correct answer is $11,250 ($13,375 - $1,500).

The cost of the land includes the purchase price of $110,000, the property taxes of $1,500, the title and attorney fees of $1,000, and the grading expenses of $2,200. Adding all these amounts together, the total cost of the land is $114,700.

Depletion refers to the process of allocating the cost of natural resources to expense. This is done to reflect the gradual reduction in the value of these resources as they are extracted and used. Depletion is a common accounting practice used in industries such as mining, oil and gas, and timber, where the value of the natural resources being extracted decreases over time. By allocating the cost of these resources to expense, companies can accurately reflect the decrease in their value and account for the depletion of their natural resources.

Land improvements should be depreciated over their useful life. This is because land improvements, such as driveways, fences, and landscaping, are considered separate from the land itself and have a limited useful life. Depreciating them over their useful life allows for the allocation of the cost of these improvements over time, reflecting their gradual wear and tear and obsolescence.

The cost of land does not include annual property taxes. This means that when purchasing land, the buyer would need to consider and budget for these taxes separately. The cost of land typically refers to the purchase price of the land itself, excluding any ongoing expenses such as property taxes.

The machine acquired in the exchange should be recorded on Schopenhauer's books at $45,000. This is because the fair value of the old machine is lower than its book value, indicating a loss on the exchange. The fair value of the new machine is not relevant in this case, as the transaction has commercial substance. Therefore, the machine should be recorded at its fair value of $35,000, and the loss of $4,000 ($39,000 - $35,000) should be recognized. Adding the $10,000 cash paid, the total cost of the new machine is $45,000.

When a plant asset is sold before it is fully depreciated, it can result in either a gain or a loss on disposal. The gain or loss is calculated by comparing the selling price of the asset with its book value (cost minus accumulated depreciation). If the selling price is higher than the book value, a gain occurs. Conversely, if the selling price is lower than the book value, a loss occurs. Therefore, depending on the circumstances, either a gain or a loss can occur when a plant asset is sold before it is fully depreciated.

During the construction period, certain costs can be capitalized, meaning they are treated as an asset rather than an expense. Excavation fees are typically considered a direct cost of constructing the plant and are therefore capitalized. On the other hand, building permit fees are generally considered an administrative expense and are not capitalized. Capitalizing means adding the cost to the value of the asset being constructed. Therefore, the correct statement is that excavation fees are capitalized but building permit fees are not.

The correct answer is $185,000. The total amount debited to Patents through July 31, 2014, should include both the research and development costs of $150,000 and the legal fees of $35,000. Therefore, the total amount debited to Patents is $150,000 + $35,000 = $185,000.

The depreciation expense for 2014 is $12,100. This can be calculated by subtracting the new salvage value of $2,000 from the original cost of the tow truck ($60,000 - $2,000 = $58,000), and then dividing that amount by the remaining estimated life of 4 years (including 2014) ($58,000 / 4 = $14,500). Since the adjustment was made on December 31, 2014, the depreciation expense for 2014 would be half of the annual depreciation, which is $14,500 / 2 = $7,250. However, since the adjusting entries had not been made yet, the depreciation expense for 2014 would be the difference between the original depreciation expense for 2014 ($7,500) and the new depreciation expense ($7,250), which is $7,500 - $7,250 = $12,100.

The amount of gain or loss recorded at the time of the sale can be calculated by subtracting the machine's book value from the sale price. The book value of the machine can be calculated by dividing the original cost by the number of years of depreciation. In this case, the machine was depreciated for 4.5 years (from January 1, 2010, to June 30, 2014). Therefore, the book value of the machine would be $80,000 divided by 10 years, multiplied by 4.5 years, which equals $36,000. Subtracting the book value from the sale price of $26,000 would result in a loss of $18,000.

The straight-line method of depreciation calculates an equal amount of depreciation expense each year over the useful life of the asset. In this case, the equipment has a total cost of $400,000 and a salvage value of $10,000. The difference between the cost and salvage value is $390,000, which is the total amount to be depreciated over 5 years. Dividing $390,000 by 5 gives an annual depreciation expense of $78,000. Since the question asks for the accumulated depreciation at the end of 2014, we need to calculate the depreciation expense for 2013 and 2014. The accumulated depreciation at the end of 2014 would be $78,000 (depreciation expense for 2013) + $78,000 (depreciation expense for 2014) = $156,000.

The entry to record depletion includes a debit to Depletion Expense of $1,200,000 because depletion is the process of allocating the cost of a natural resource over its estimated useful life. In this case, 2 million tons of coal were mined and sold in the first year, which represents 10% of the total estimated coal to be extracted. Therefore, the depletion expense for the first year would be 10% of the total cost, which is $1,200,000.

In 2011, the land account should be increased by $0. This is because although the land has appreciated in value from $50,000 to $51,800, the increase in value has not been realized or recognized by the company. The land is still owned by the company and has not been sold or otherwise disposed of, so the increase in value is considered unrealized and should not be recorded as an increase in the land account.

A patent is a legal protection granted to an inventor or creator of a new invention or innovation. It gives them exclusive rights to their invention for a certain period of time. However, the correct answer is that a patent is nonrenewable. This means that once the patent expires, usually after 20 years from the filing date, the inventor no longer has exclusive rights to their invention and it becomes available for others to use and reproduce. Therefore, the inventor cannot renew the patent and retain exclusive rights beyond the initial 20-year period.