Question Details

CHAPTER 10 PART 9  PLANT ASSETS, NATURAL RESOURCES, AND INTANGIBLE ASSETS

141. If disposal of a plant asset occurs during the year, depreciation is
a. not recorded for the year.
b. recorded for the whole year.
c. recorded for the fraction of the year to the date of the disposal.
d. not recorded if the asset is scrapped.
142. If a fully depreciated plant asset is still used by a company, the
a. estimated remaining useful life must be revised to calculate the correct revised
depreciation.
b. asset is removed from the books.
c. accumulated depreciation account is removed from the books but the asset account
remains.
d. asset and the accumulated depreciation continue to be reported on the balance sheet
without adjustment until the asset is retired.
143. Which of the following statements is not true when a fully depreciated plant asset is
retired?
a. The plant asset's book value is equal to its estimated salvage value.
b. The accumulated depreciation account is debited.
c. The asset account is credited.
d. The plant asset's original cost equals its book value.
144. If a plant asset is retired before it is fully depreciated, and no salvage or scrap value is
received,
a. a gain on disposal will be recorded.
b. phantom depreciation must be taken as though the asset were still on the books.
c. a loss on disposal will be recorded.
d. no gain or loss on disposal will be recorded.
10 - 22 Test Bank for Accounting Principles, Eighth Edition
145. The book value of an asset will equal its fair market value at the date of sale if
a. a gain on disposal is recorded.
b. no gain or loss on disposal is recorded.
c. the plant asset is fully depreciated.
d. a loss on disposal is recorded.
146. A truck costing $110,000 was destroyed when its engine caught fire. At the date of the
fire, the accumulated depreciation on the truck was $50,000. An insurance check for
$125,000 was received based on the replacement cost of the truck. The entry to record
the insurance proceeds and the disposition of the truck will include a
a. Gain on Disposal of $15,000.
b. credit to the Truck account of $60,000.
c. credit to the Accumulated Depreciation account for $50,000.
d. Gain on Disposal of $65,000.
147. On July 1, 2008, Meed Kennels sells equipment for $66,000. The equipment originally
cost $180,000, had an estimated 5-year life and an expected salvage value of $30,000.
The accumulated depreciation account had a balance of $105,000 on January 1, 2008,
using the straight-line method. The gain or loss on disposal is
a. $9,000 gain.
b. $6,000 loss.
c. $9,000 loss.
d. $6,000 gain.
148. A loss on disposal of a plant asset is reported in the financial statements
a. in the Other Revenues and Gains section of the income statement.
b. in the Other Expenses and Losses section of the income statement.
c. as a direct increase to the capital account on the balance sheet.
d. as a direct decrease to the capital account on the balance sheet.
149. Wells Company's delivery truck, which originally cost $70,000, was destroyed by fire. At
the time of the fire, the balance of the Accumulated Depreciation account amounted to
$47,500. The company received $40,000 reimbursement from its insurance company. The
gain or loss as a result of the fire was
a. $30,000 loss.
b. $17,500 loss.
c. $30,000 gain.
d. $17,500 gain.
150. A truck that cost $21,000 and on which $10,000 of accumulated depreciation has been
recorded was disposed of for $9,000 cash. The entry to record this event would include a
a. gain of $2,000.
b. loss of $2,000.
c. credit to the Truck account for $11,000.
d. credit to Accumulated Depreciation for $10,000.
151. A truck that cost $36,000 and on which $30,000 of accumulated depreciation has been
recorded was disposed of for $9,000 cash. The entry to record this event would include a
a. gain of $3,000.
b. loss of $3,000.
c. credit to the Truck account for $6,000.
d. credit to Accumulated Depreciation for $30,000.
Plant Assets, Natural Resources, and Intangible Assets 10 - 23
152. Ace Corporation sold equipment for $12,000. The equipment had an original cost of
$36,000 and accumulated depreciation of $18,000. As a result of the sale,
a. net income will increase $12,000.
b. net income will increase $6,000.
c. net income will decrease $6,000.
d. net income will decrease $12,000.
153. Jarman- Courier Service recorded a loss of $3,000 when it sold a van that originally cost
$28,000 for $5,000. Accumulated depreciation on the van must have been
a. $26,000.
b. $8,000.
c. $25,000.
d. $20,000.
154. On a balance sheet, natural resources may be described more specifically as all of the
following except
a. land improvements.
b. mineral deposits.
c. oil reserves.
d. timberlands.
155. Natural resources are
a. depreciated using the units-of-activity method.
b. physically extracted in operations and are replaceable only by an act of nature.
c. reported at their market value.
d. amortized over a period no longer than 40 years.
156. Depletion is
a. a decrease in market value of natural resources.
b. the amount of spoilage that occurs when natural resources are extracted.
c. the allocation of the cost of natural resources to expense.
d. the method used to record unsuccessful patents.
157. To qualify as natural resources in the accounting sense, assets must be
a. underground.
b. replaceable.
c. of a mineral nature.
d. physically extracted in operations.
158. The method most commonly used to compute depletion is the
a. straight-line method.
b. double-declining-balance method.
c. units-of-activity method.
d. effective interest method.
159. In computing depletion, salvage value is
a. always immaterial.
b. ignored.
c. impossible to estimate.
d. included in the calculation.
10 - 24 Test Bank for Accounting Principles, Eighth Edition
160. If a mining company extracts 1,500,000 tons in a period but only sells 1,200,000 tons,
a. total depletion on the mine is based on the 1,200,000 tons.
b. depletion expense is recognized on the 1,500,000 tons extracted.
c. depletion expense is recognized on the 1,200,000 tons extracted and sold.
d. a separate accumulated depletion account is set up to record depletion on the
300,000 tons extracted but not sold.