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Exam 8: Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

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Question 61

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Which of the following would not be classified as property, plant and equipment on a balance sheet?

A) Land held for investment.
B) Equipment used in the manufacturing process.
C) A building used as corporate headquarters.
D) A natural resource being mineD.Land held as an investment would be reported on a balance sheet as an investment.

E) B) and C)
F) All of the above

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Question 62

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The following information is available for Coca-Cola and PepsiCo: Required: Compute the fixed asset turnover ratio for both Coca Cola and PepsiCo. Round your answers to two decimal places.

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Coca-Cola fixed asset turnover...

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Question 63

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Landmark Restaurants reported net income of $45.9 million during Year 6. Landmark reported depreciation and amortization of plant and equipment of $48.8 million and cash paid for additions to property, plant and equipment of $162.9 million during Year 6. Required: Explain where each of these items would be reported and their impact on cash flows on the statement of cash flows.

The land cost initially reported on the balance sheet may include legal fees and title insurance.

On January 1, 2016, Woodstock, Inc. purchased a machine costing $40,000. Woodstock also paid $1,000 for transportation and installation. The expected useful life of the machine is 6 years and the residual value is $5,000. If Woodstock uses the straight-line depreciation method, which of the following statements is incorrect?

Which one of the following would not be recorded as an intangible asset?

On January 1, 2016, Woodstock, Inc. purchased a machine costing $40,000. Woodstock also paid $1,000 for transportation and installation. The expected useful life of the machine is 6 years and the residual value is $5,000. How much is the annual depreciation expense assuming use of the straight-line depreciation method?

An expenditure is capitalized when it is reported as an expense on the income statement.

If an expenditure related to a depreciable asset is incorrectly treated as a capital expenditure, instead of as repairs and maintenance expense, which of the following statements is true?

Which of the following statements about asset impairment is false?

Use of the double-declining-balance method of depreciation results in higher depreciation expense during the first year of an asset's life relative to use of the straight-line depreciation method.

Depreciation is the process of allocating a long-lived asset's cost over its productive life.

In most cases, the depreciation method chosen for financial reporting purposes (GAAP) must also be utilized for income tax reporting (IRS).

Which of the following statements is correct with respect to a loss on the sale of a depreciable asset?

On January 1, 2016, Trenton Company purchased a machine costing $50,000. Trenton also incurred the following costs: transportation, $1,000; installation, $2,000; and sales tax, $3,000. Required: Prepare the journal entry to record the machine acquisition assuming cash was paid.

Lue Company sold used equipment for $450,000 cash. The equipment was purchased 5 years ago for a cost of $800,000. It has been depreciated using the straight-line method over an estimated useful life of 10 years with an estimated residual value of $50,000. Required: Prepare the journal entry at the end of year five for the asset's disposal assuming the fifth year's depreciation had been recorded.

Hubbard Company purchased a truck on January 1, 2015, at a cost of $34,000. The company estimated that the truck would have a useful life of 4 years and a residual value of $4,000. Required: A.Calculate depreciation expense under straight line and double declining balance for 2015-2018. B.Which of the two methods would result in lower net income in 2015 and 2018?

If a long-lived asset has been impaired, the journal entry will require a debit to a loss account and a credit to the long-lived asset account.

The following information was available for Landmark Restaurants for the past three years. Required: Using this information, compute the fixed asset turnover ratio for Year 3 and Year 2. (Round your answers to two decimal places.)

Smith Company exchanges assets to acquire a building. The market price of the Smith stock on the exchange date was $35 per share and the building's book value on the books of the seller was $250,000. Which of the following is correct for Smith Company when Smith issues 10,000 shares of $10 par value common stock and pays $20,000 cash in exchange for the building?