Question 1

What costs can be capitalized as part of the cost of a natural resource?

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Question 2

Information concerning a mine is as follows: 
 Required:
Compute the total cost of inventory at the end of the year.

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Question 3

In what three respects does the computation for depreciation for federal income tax purposes and financial reporting purposes differ for assets purchased after 1987?

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Question 4

On January 1, 2013, the Jones-Smith Corp. acquired a parcel of land for $6,000,000 from which it expects to extract 300,000 tons of coal over the next ten years. Afterwards, the land will be reclaimed at an estimated cost of $650,000 and sold for an estimated $350,000. In 2014, a building was constructed on the mine site for $680,000 with an estimated zero value when mining is completed.
During 2013, 15,000 tons were mined, and in 2014, 19,000 tons were mined. At the beginning of 2014, the amount of ore remaining was revised to 250,000 tons.
Required: 
a.Prepare the depletion entry for 2013.
b.Determine the total amount of inventoriable costs to be recorded in 2014.

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Question 5

Companies can apply composite depreciation to a grouping of dissimilar assets. What procedures must be followed?

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Question 6

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Question 7

On January 1, 2013, Smith-Jones Company purchased office furniture for $80,000. Other data on the purchase include the following: 
Required: a.Compute the depreciation deduction for the 2013 tax return.
b.Assume the asset is sold on April 1, 2021 for $3,000. Compute the gain/loss on disposal for both financial reporting and tax reporting.

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Question 8

Making intercompany comparisions is equally as important to insiders as well as outsiders. What two measures can provide investors and analysts with information regarding a companies property, plant, and equipment?

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Question 9

On January 1, 2014 Hill Bowling purchased equipment for $3.5 million. The equipment is depreciated over 10 years and has no residual value but if sold would want to get $25,000. Hill uses the straight line method of depreciation. In 2018 new advanced bowling equipment came on the market. Hill believes the bowling equipment currently being used is going to become obsolete quicker than anticipated. Hill wants to complete an impairment test. Estimates are made concerning the net cash flows of $250,000 for the next five years. Hill uses a 14% discounted rate to evaluate other projects of this nature.
Required:
Complete the Impairment test for Hill's Bowling.

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Question 10

On April 1, 2014, an uninsured machine was totally destroyed in an accident at Rogers' manufacturing plant. The machine had been acquired on January 1, 2011, at a cost of $70,000. The machine had been expected to have a useful life of seven years and a residual value of $7,000. Rogers depreciates machines using the straight-line method and computes depreciation to the nearest whole month. No depreciation has been recorded in 2014.
Required:
Record the 2014 depreciation expense and the disposal of the machine.

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Question 11

On January 1, 2014, Travis Company purchased machinery costing $3,000,000. The company uses straight-line depreciation and estimated the machinery's useful life to be 10 years and its residual value to be $600,000.
At the end of 2017, the company felt that technological advances had caused an impairment of its machinery and that its remaining useful life was only four years. The company estimates the machinery will generate cash inflows of $850,000 and cash outflows of $100,000 each of the next four years. The company uses a 15% rate of return to evaluate capital budgeting projects.
Required: 
a.Determine if an impairment loss has occurred. (Show all calculations).
b.Calculate the amount of any impairment loss to be recognized. The present value of an annuity is 2.85498; present value of $1 is 0.57175; and future value of annuity is 4.99338.

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Question 12

When accounting for long-lived assets, companies may make modifications in the procedures related to specific assets. Companies may change depreciation methods or may change an estimate of the service life of the assets.
Required:
Describe how these two types of accounting changes are to be handled.

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Question 13

What disclosures are required by GAAP for depreciation?

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Question 14

It has been suggested that repair and maintenance costs should be considered when selecting a depreciation method.
Required:
Discuss the reasoning behind this assertion and explain how it would be implemented.

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Question 15

As part of the normal activities of company's assets are sold or disposed. What steps are necessary in order to complete an asset disposal?

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Question 16

What four factors must be considered in the computation of depreciation? Provide a brief description of each.

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Question 17

The MACRS Depreciation table as follows: 
Required:
Using the MACRS Depreciation table calculate each year of depreciation for each independent situation.

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Required:
Using...

Question 18

The straight-line and accelerated depreciation methods differ significantly in the amount and timing of the depreciation expense recognized and reported each year.
Required:
Discuss the factors that should be considered when choosing between the straight-line and accelerated depreciation methods.

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Question 19

List the time based allocation methods of cost allocation, provide a brief explanation of each.

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Question 20

Assets from time to time become impaired. GAAP requires companies to review their asset for impairment. This review should take place whenever events or circumstances indicate the carrying value of the asset my not be recoverable. Provide three example in which events or circumstances may cause a company to review their assets for impairment.

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Quiz 11: Depreciation, Depletion, Impairment, and Disposal

What costs can be capitalized as part of the cost of a natural resource?

Information concerning a mine is as follows: Required: Compute the total cost of inventory at the end of the year.