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Exam 11: Property, Plant, and Equipment and Intangible Assets: Utilization and Disposition

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Question 21

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Intangible assets that have an indefinite useful life:

A) Are those with no foreseeable limit on the period of time over which the asset is expected to contribute to the cash flows of the entity.
B) Are those with no legal, contractual, or economic factors that are expected to limit their useful life to a company.
C) Are those whose acquisition costs is not amortized over their useful life.
D) All of these answer choices are correct.

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

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Question 22

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On January 1, 2018, Morrow Inc. purchased a spooler at a cost of $40,000. The equipment is expected to last eight years and have a residual value of $4,000. During its eight-year life, the equipment is expected to produce 250,000 units of product. In 2018 and 2019, 42,000 and 76,000 units respectively were produced. -Required: Compute depreciation for 2018 and 2019 and the book value of the spooler at December 31, 2018 and 2019, assuming the double-declining-balance method is used.

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Straight-line rate =...

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Question 23

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Which of the following typically would cause the service life of an asset to be less than its physical life?

Component depreciation, required under International Financial Reporting Standards (IFRS), is allowed but rarely used by U.S. companies.

In 2017, Dooling Corporation acquired Oxford Inc. for $250 million, of which $50 million was attributed to goodwill. At the end of 2018, Dooling's accountants derive the following information for a required goodwill impairment test: -Required: Determine the amount, if any, of the goodwill impairment loss that Dooling must recognize on these assets.

The replacement of a major component increased the productive capacity of production equipment from 10 units per hour to 18 units per hour. The expenditure should be debited to:

An asset that has an estimated physical life of six years and an estimated service life of four years should be depreciated over:

Listed below are five terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term. -Date placed in service

In December of 2018, XL Computer's internal auditors discovered that office equipment costing $800,000 was charged to expense in 2016. The asset had an expected life of 10 years with no residual value. XL would have recorded a half year of depreciation in 2016. Required: Prepare the necessary correcting entry that would be made in 2018 (ignore income taxes), and the entry to record depreciation for 2018.

Accounting for impairment losses:

Which of the following types of subsequent expenditures normally is capitalized?

Listed below are 10 terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the correct term. -Additions

An asset was acquired on January 1, 2018, for $15,000 with an estimated 4-year life and $1,000 residual value. The company uses straight-line depreciation. Calculate the gain or loss if the asset was sold on December 31, 2020, for $5,000.

On January 1, 2016, Al's Sporting Goods purchased store fixtures at a cost of $180,000. The anticipated service life was 10 years with no residual value. Al's has been using the double-declining balance method, but in 2018 adopted the straight-line method because the company believes it provides a better measure of income. Al's has a December 31 year-end. The journal entry to record depreciation for 2018 is:

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Indefinite life

Which of the following typically refers to the process of allocating the cost of long-term intangible assets used in the business over future periods?

Why is land not depreciated? What are land improvements? Why do we record land and land improvements separately?

Cutter Enterprises purchased equipment for $72,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $6,000. -Using the double-declining balance method, the book value at December 31, 2019, would be:

On January 1, 2018, Tabitha Designs purchased a patent giving it exclusive rights to manufacture a new type of synthetic clothing for $240,000. While the patent had a remaining legal life of 15 years at the time of purchase, Tabitha expects the useful life to be only eight more years. In addition, Tabitha purchase equipment related to production of the new clothing for $140,000. The equipment has a physical life of 10 years but Tabitha plans to use the equipment only over the patent's service life and then sell it for an estimated $20,000. Tabitha uses straight-line for all long-term assets. The amount to expense in 2021 related to the patent and equipment should be:

Qualcomm Inc. engages in the development, design, manufacture, and marketing of digital wireless telecommunications products and services. In a recent income statement the company reported a $114 million goodwill impairment loss. The loss related to the goodwill of its Firethorn reporting unit. Required: 1. Why did Qualcomm conduct an impairment test of the goodwill of this reporting unit? 2. Describe the steps Qualcomm performed to conduct its impairment test. 3. Where would the impairment loss be shown in the company's income statement?