Question Details

CHAPTER 10 PART 3 PLANT ASSETS, NATURAL RESOURCES, AND INTANGIBLE ASSETS

21. Capital expenditures are expenditures that increase the company's investment in
productive facilities.
22. Ordinary repairs should be recognized when incurred as revenue expenditures.
23. A characteristic of capital expenditures is that the expenditures occur frequently during the
period of ownership.
24. Once an asset is fully depreciated, no additional depreciation can be taken even though
the asset is still being used by the business.
25. The fair market value of a plant asset is always the same as its book value.
26. If the proceeds from the sale of a plant asset exceed its book value, a gain on disposal
occurs.
27. 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.
28. The book value of a plant asset is the amount originally paid for the asset less anticipated
salvage value.
29. A loss on disposal of a plant asset as a result of a sale or a retirement is calculated in the
same way.
30. A plant asset must be fully depreciated before it can be removed from the books.
31. 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.
32. Depletion cost per unit is computed by dividing the total cost of a natural resource by the
estimated number of units in the resource.
33. The Accumulated Depletion account is deducted from the cost of the natural resource in
the balance sheet.
34. Depletion expense for a period is only recognized on natural resources that have been
extracted and sold during the period.
35. Natural resources are long-lived productive assets that are extracted in operations and
are replaceable only by an act of nature.
36. The cost of natural resources is not allocated to expense because the natural resources
are replaceable only by an act of nature.
Plant Assets, Natural Resources, and Intangible Assets 10 - 7
37. Conceptually, the cost allocation procedures for natural resources parallels that of plant
assets.
38. Natural resources include standing timber and underground deposits of oil, gas, and
minerals.
39. If an acquired franchise or license has an indefinite life, the cost of the asset is not
amortized.
40. When an entire business is purchased, goodwill is the excess of cost over the book value
of the net assets acquired.