Plant assets are long-lived assets used in a company's operations. They include land, buildings, equipment, and natural resources. Land is not depreciated as it has an unlimited useful life. Other plant assets are depreciated over their estimated useful lives using methods like straight-line or units of production. Intangible assets lack physical form and include patents, trademarks, copyrights, and goodwill. They are amortized over their useful lives, except for goodwill which is tested annually for impairment. Long-term assets are reported on the balance sheet net of any accumulated depreciation, depletion or amortization.

2. Plant Assets Review Questions Chapter 10

4. Answer: 3

6. Answer: 1 Depreciation is the allocation of the plant assets cost over its useful life. Because land does not have a defined useful life, it does not lose usefulness; therefore, it is not depreciated.

8. Answer: 2 and 3 Grading the land and removing the old building are added to the Land account. Mowing the grass is a maintenance expense.

9. Tyne Company made a lump-sum purchase of land and building for $100,000. The appraised values for the land was $22,000 and the for the building was $88,000. How much should be debited to Building?

10. Answer: $80,000 Total appraised value = $22,000 + $88,000 = $110,000 80% (88,000 ÷ 110,000) of the $100,000 cost should be allocated to the Building. $100,000 x 80% = $80,000

12. Answer: 3 An addition is a permanent improvement that makes the building more useful for a long period of time. Capital expenditure ıncreases the asset’s capacity or efficiency or extends the asset’s useful life.

14. Answer: $1,000 (Cost – Residual value) ÷ Years of useful life ($9,000 - $1,000) ÷ 8 years = $1,000

16. Answer: $960 (Cost – Residual value) ÷ Total units of output ($9,000 - $1,000) ÷ 10,000 hours = $0.80 per hour $0.80 x 1,200 hours = $960

18. Answer: $2,250 (Cost–Accumulated depreciation) x (2/yrs of life) = ($9,000 – 0) x (2/8) = $2,250

20. Answer: 2 Depreciation expense is recognized only to extent that an asset has been used in a period.

21. Change in Accounting Estımate In 2005, Conway Company purchased an asset for $6,000. It was estimated to have a useful life of 5 years and a residual value of $1,000. The straight-line method of depreciation is used. At the beginning of 2007, Conway revises the estimated useful to a total of 8 years. How much depreciation expense will Conway recognize on the asset at the end of 2007?

22. Answer: $500 Cost $6,000 Depreciation for 2005 $1,000 Depreciation for 2006 1,000 (2,000) Book value $4,000 Less residual value (1,000) $3,000 $3,000 ÷ (8 – 2 years) = $500

23. Roge Company owns a truck that cost $35,000 and has total accumulated depreciation of $20,000 to-date. Roge sells the truck for $10,000. What amount of gain/(loss) is recognized on the date of sale? What is the journal entry to record this sale?

24. Cost $35,000 Accumulated Depreciation (20,000) Book value $15,000 Cash received from sale (10,000) Loss on sale $5,000

28. Long-lived Assets Plant Assets Natural Resources Intangible Assets Depreciation Depletion Amortization

34. a) Mineral Asset 398,500 Cash 398,500 b) Mineral Asset 1,500 Cash 1,500 To record filing and license fees GENERAL JOURNAL DATE DESCRIPTION REF DEBIT CREDIT

35. b) Mineral Asset 60,000 Cash 60,000 Paid for geological survey c) Depletion Expense, Mineral Asset 92,000 Accumulated Depletion, Mineral Asset 92,000 GENERAL JOURNAL DATE DESCRIPTION REF DEBIT CREDIT

38. Objective 6 Account for intangible assets

43. Intangible Assets: Patents Jan. 1 Patents 170,000 Cash 170,000 To acquire a patent Dec. 31 Amortization Expense 34,000 Patents ($170,000/5) 34,000 To amortize the cost of a patent

45. Intangible Assets: Copyrights Literary compositions (novels) Musical compositions Films (movies) Software Other works of art

47. Intangible Assets: Trademarks Trademarks, Trade Names, or Brand Names are assets that represent distinctive identifications of a product or service.

51. Intangible Assets: Goodwill Purchase price paid for Mexana Company $10 million Assets at market value 9 million Less Mexana’s liabilities 1 million Market value of Mexana’s net assets 8 million Goodwill $ 2 million Goodwill Example – p. 417

53. Calculation of Goodwill Purchase price paid for Kettle Chips...........………… $8,000,000 Market value of Kettle Chips’ net assets: Market value of Kettle Chips’ assets $15,000,000 Less: Kettle Chips’ liabilities.....……. (10,000,000 ) Market value of Kettle Chips’ net assets..………... 5,000,000 Cost of goodwill purchased..............…………………. $3,000,000

56. Objective Report long-term assets on the balance sheet

57. Balance Sheet Presentation Total Current Assets $880,000 Property, Plant, and Equipment Land 120,000 Buildings $800,000 Equipment 160,000 960,000 Less: Accumulated Depreciation, Buildings and Equipment (410,000) 550,000 Oil $380,000 Less: Accumulated Depletion, Oil (80,000) 300,000 Property, Plant, and Equipment, net 970,000 Goodwill 350,000

60. End of Chapter 10