Question 1

Companies are required to report plant assets as a single amount,with a note to the financial statements that provides detailed information.

Accepted Answer

Companies may choose to report plant assets as a single amount, with a note to the financial statements that provides detailed information, or companies may provide detailed information on the face of the statement.

Question 2

A fully depreciated plant asset ________.

Accepted Answer

Even though a plant asset is fully depreciated, it still has some value and can be discarded, sold or exchanged for another plant asset. Therefore, option B is the correct choice. Options A, C and D are incorrect because a fully depreciated plant asset still has a presence in the accounting records, and can be used in the business.

Question 3

Gain or loss is determined by comparing the cash received and the market value of any other asset received with the historical cost of the asset disposed of.

Accepted Answer

Gain or loss is determined by comparing the cash received and the market value of any other asset received with the book value of the asset disposed of.

Question 4

U.S.Generally Accepted Accounting Principles permits the presentation of plant assets at their fair market value.

Accepted Answer

U.S. Generally Accepted Accounting Principles (GAAP) does not permit the presentation of plant assets at their fair market value. Instead, GAAP requires plant assets to be presented at their historical cost less accumulated depreciation.

Question 5

Regardless of the type of plant asset disposal,the first step is to bring the depreciation up to date.

Accepted Answer

Depreciation needs to be brought up to date before disposing of any plant asset, regardless of the type of disposal. This ensures that the asset's value is accurately reflected in the financial statements and any gains or losses from the disposal are properly recorded.

Question 6

Long Island Company discards a truck that was originally purchased for $50,000 and had accumulated depreciation of $30,000.Prepare the journal entry for the disposal.Omit explanation.

Accepted Answer

The answer of Long Island Company discards a truck that...

Question 7

Companies may choose to report plant assets as a single amount,with a note to the financial statements that provides detailed information,or companies may provide detailed information on the face of the statement.

Accepted Answer

Companies have the option to report plant assets as a single amount with a note providing detailed information or to present detailed information on the face of the statement.

Question 8

A photocopier cost $104,000 when new and has accumulated depreciation of $95,000.If the business discards this plant asset,the result is ________.

Accepted Answer

Loss on disposal = $104,000 - $95,000 = $9000

Question 9

Brandy Enterprises discarded a computer that was fully depreciated and had no residual value.As a result of this transaction,Brandy will ________.

Accepted Answer

Since the computer was fully depreciated and had no residual value, there will be no gain or loss on its disposal. Therefore, the best option is to zero out both the Computer and Accumulated Depreciation - Computer accounts.

Question 10

Claxton Company purchased a van on January 1,2018,for $820,000.Estimated life of the van was five years,and its estimated residual value was $103,000.Claxton uses the straight-line method of depreciation.At the beginning of 2020,the company revised the total estimated life of the asset from five years to four years.The estimated residual value remained the same as estimated earlier.Calculate the depreciation expense for 2020.

Accepted Answer

Depreciation per year = (Cost - Residual value) / Useful life
Depreciation per year = ($820,000 - $103,000) / 5 = $143,400
Depreciation provided in the books = $143,400 × 2 years = $286,800
Revised depreciation for the year 2020 = ($820,000 - $286,800 - $103,000) / 2 = $215,100

Question 11

Under U.S.GAAP,plant assets are reported at book value on the balance sheet.

Accepted Answer

Under U.S.GAAP, plant assets are reported at book value on the balance sheet, which is the historical cost of the asset less accumulated depreciation.

Question 12

IFRS permits the presentation of plant assets at their fair market value because ________.

Accepted Answer

IFRS permits the presentation of plant assets at their fair market value because it may be more relevant to financial statement users.

Question 13

Discarding plant assets involves disposing of the asset for no cash.

Accepted Answer

Discarding plant assets refers to the removal of a fixed asset from the company's accounting records because it is no longer in use and is disposed of without any cash being received in return.

Question 14

Plant assets remain on the business's books until they are disposed of.

Accepted Answer

Plant assets, such as buildings, equipment, and land, are long-term assets that are recorded on a company's balance sheet and remain there until they are retired or disposed of.

Question 15

A fully depreciated plant asset that is still in service is not reported as an asset on the balance sheet.

Accepted Answer

A fully depreciated plant asset that is still in service should still be reported on the balance sheet, but its value should show as zero or its salvage value. This is because the asset still has economic value and should be disclosed in the financial statements.

Question 16

IFRS permits the presentation of plant assets at their fair market value.

Accepted Answer

Under IFRS, the presentation of plant assets at fair market value is permitted as an accounting policy choice, though such a choice is not a requirement. Depending on the nature of the asset, this may result in fluctuations in reported profits or losses over time. It is worth noting that fair market value may be different from the historical cost of the asset, which is based on the original purchase price and any subsequent improvements or maintenance costs.

Question 17

When a plant asset is disposed of,the business must ________.

Accepted Answer

When a plant asset is disposed of, it is essential to bring the depreciation up to date to accurately reflect the asset's value and the period it has been in use up to the point of disposal. This ensures that the financial statements accurately represent the company's financial position.

Question 18

Rotan Company purchased a van on January 1,2018,for $810,000.Estimated life of the van was five years,and its estimated residual value was $98,000.Rotan uses the straight-line method of depreciation.At the beginning of 2020,the company revised the total estimated life of the asset from five years to six years.The estimated residual value remained the same as estimated earlier.Calculate the depreciation expense for 2020.

Accepted Answer

Depreciation per year = (Cost - Residual value) / Useful life
Depreciation per year = ($810,000 - $98,000) / 5 = $142,400
Depreciation provided in the books = $142,400 × 2 years = $284,800
Revised depreciation for the year 2020 = ($810,000 - $284,800 - $98,000) / 4 years = $106,800

Question 19

Under U.S.GAAP,which of the following is NOT an acceptable way to report plant assets?

Accepted Answer

Under U.S.GAAP, reporting plant assets at fair market value is generally not an acceptable way. The acceptable ways to report plant assets are either at book value or as a single amount with a note to the financial statements that provides detailed information. Detailed information on the face of the balance sheet may be provided, but it is not necessary.

Question 20

If an asset is discarded when it is fully depreciated and has no residual value,the business does not need to make a journal entry because the book value is zero.

Accepted Answer

If an asset is disposed of when it is fully depreciated and it has no residual value, the business simply removes the asset and contra asset, Accumulated Depreciation, from the books.

Quiz 10: Plant Assets,natural Resources,and Intangibles