Property Plant and Equipment Paper 1

1

Which of the following is not an appropriate basis for measuring the cost of property, plant, and equipment?






2

An entity installed an assembly line in Year 1. Four years later, $100,000 was invested to automate the line. The automation increased the market value and productive capacity of the assembly line but did not affect its useful life. Proper accounting for the cost of the automation should be to






3

"A theme park purchased a new, exciting ride and financed it through the manufacturer. The following facts pertain:"
Purchase price $800,000
Delivery cost 50,000
Installation cost 70,000
Cost of trial runs 40,000
Interest charges for first year 60,000
"The straight-line method is to be used. Compute the depreciation on the equipment for the first year assuming an estimated service life of 5 years."






4

Which of the following is not an appropriate basis for measuring the historical cost of property, plant, and equipment?






5

In making a cash flow analysis of property, plant, and equipment (PPE), the internal auditor discovered that depreciation expense for the period was $10,000. PPE with a cost of $50,000 and related accumulated depreciation of $30,000 was sold for a gain of $1,000. If the carrying amount of PPE increased by $80,000 during the period, how much PPE was purchased this period?






6

On January 1, Year 1, an entity purchased an abandoned quarry for $1,200,000 to be used as a landfill to service its trash collection contracts with nearby cities for the next 20 years. The entity depletes the quarry using the units-of-production method based on a surveyor’s measurements of volume of the quarry’s pit. This amount was 500,000 cubic yards when purchased and 350,000 cubic yards at year-end Year 5. What is the net amount that should be shown on the entity’s December 31, Year 5, statement of financial position for the quarry?






7

A new machine has an initial cost of $300,000, an estimated useful life of 2,000 hours of use over a 3-year period, and an estimated residual value of $70,000. Usage rates are estimated as 500 hours in the first year, 700 hours in the second year, and 800 hours in the third year. Depreciation expense in Year 2 under the units-of-production method of depreciation will be






8

A company uses straight-line depre accelerated depreciation for tax purposes. Which of the following account balances would be lower in the financial statements used for tax purposes than it would be in the general purpose financial statements?






9

All of the following would be included as part of the cost of a depreciable asset except the






10

The board of directors of Ingold Industries, Inc., authorized Don Burger, president of Ingold, to pay as much as $90,000 to purchase a tract of land adjacent to the main factory. Burger negotiated a price of $75,800 for the land, and legal fees for closing costs amounted to $820. A contractor cleared, filled, and graded the land for $6,800, and dug the foundation for a new building for $4,300. A prefabricated building was erected at a cost of $181,000. The building has an estimated useful life of 20 years with no residual value. The contractor’s bill indicated that the cost of the parking lot and driveways was $7,060. The parking lot and the driveways will need to be replaced in 15 years. The proper amount to be recorded in Ingold’s land account is






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