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Exam 10: Plant Assets, Natural Resources, and Intangible Assets

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Question 71

Multiple Choice

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IFRS allows companies to revalue plant assets to fair value. When an asset has increased in value where is the account "Revaluation Surplus" reported?

A) On the income statement as part of income from continuing operations (other revenues and gains) .
B) On the income statement as part of discontinued operations (discontinuing historical cost) .
C) On the statement of financial position as part of accumulated comprehensive income (equity) .
D) All of the choices are acceptable methods for the reporting of "Revaluation Surplus".

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

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Question 72

Multiple Choice

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Orr Corporation sold equipment for $30000. The equipment had an original cost of $90000 and accumulated depreciation of $45000. As a result of the sale

A) net income will increase $30000.
B) net income will increase $15000.
C) net income will decrease $15000.
D) net income will decrease $30000.

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

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Question 73

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A plant asset must be fully depreciated before it can be removed from the books.

Depletion cost per unit is computed by dividing the total cost of a natural resource by the estimated number of units in the resource.

A patent

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

Gains on an exchange of plant assets that has commercial substance are

A coal company invests $15 million in a mine estimated to have 20 million tons of coal and no salvage value. It is expected that the mine will be in operation for 5 years. In the first year 1000000 tons of coal are extracted and sold. What is the depletion for the first year?

Nicklaus Company has decided to sell one of its old machines on June 30 2017. The machine was purchased for $200000 on January 1 2013 and was depreciated on a straight-line basis for 10 years with no salvage value. If the machine was sold for $65000 what was the amount of the gain or loss recorded at the time of the sale?

During 2017 Rathke Corporation reported net sales of $3000000 net income of $1200000 and depreciation expense of $100000. Rathke also reported beginning total assets of $1000000 ending total assets of $1500000 plant assets of $800000 and accumulated depreciation of $500000. Rathke's asset turnover 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 cost of a patent should be amortized over its ____________ life or its ____________ life whichever is shorter.

The declining-balance method of depreciation is called an accelerated depreciation method because it depreciates an asset in a shorter period of time than the asset's useful life.

Equipment was purchased for $85000 on January 1 2016. Freight charges amounted to $3500 and there was a cost of $10000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $15000 salvage value at the end of its 5-year useful life. What is the amount of accumulated depreciation at December 31 2017 if the straight-line method of depreciation is used?

On January 1 2017 Petersen Enterprises purchased natural resources for $1800000. The company expects the resources to produce 12000000 units of product. (1) What is the depletion cost per unit? (2) If the company mined and sold 20000 units in January what is depletion expense for the month?

For each item listed below enter a code letter in the blank space to indicate the allocation terminology for the item. Use the following codes for your answer:

Goodwill

Using the following data for Renfro Inc. compute its asset turnover. $\begin{array} { l l r } & \text { Renfro, Inc. } & \\\text { Net Income 2017 } && \$ 123,000 \\\text { Total Assets 12/31/17 } && 2,443,000 \\\text { Total Assets 12/31/16 } && 2,880,000 \\\text { Net Sales 2017 } && 2,135,000\end{array}$

Recording depreciation on plant assets affects the balance sheet and the income statement.

The method most commonly used to compute depletion is the