Property Plant and Equipment Paper 2


Basic Brick, Inc., purchased manufacturing equipment for $100,000, with an estimated useful life of 10 years and a salvage value of $15,000. The second year’s depreciation for this equipment using the double-declining balance method is


Which one of the following characteristics is not required for an asset to be properly described as property, plant, and equipment?


Equipment bought by Wilson Steam Generating Company 3 years ago was charged to equipment expense in error. The cost of the equipment was $100,000, with no expected salvage value and a 10-year estimated life. Wilson uses the straight-line depreciation method on similar equipment. The error was discovered at the end of Year 3 prior to the issuance of Wilson’s financial statements. After correction of the error, the correct carrying value of the equipment will be


The types of assets that qualify for interest capitalization are


Wellington Industries has owned its present facilities since 1981, and Mary Dunlap, CEO, has authorized various expenditures to repair and improve the building during the current year. The building was beginning to sag, and without repair, the building would only last another 8 years. To correct the problem, the foundation was reinforced, and several columns were added in the basement area at a cost of $47,200. As a result, engineers estimate that the building will have a remaining useful life of 20 years. To install a new computer local area network (LAN) and be ready for the next generation of computers, the phone lines and electrical systems were updated at a cost of $81,300. Wellington engineers estimate that these improvements should last 25 years. The offices and open work spaces were rearranged to reduce exposure to electronic emissions at a material cost of $31,000. The purchase and installation of the computers and software for the LAN cost $102,700. The LAN hardware and software will have to be replaced in 6 years, but further rearrangement of the offices and work spaces will not be necessary. After the above improvements were completed, the entire building was painted inside and outside at a cost of $9,450. As controller of Wellington Industries, which one of the following actions would you recommend to be in conformity with generally accepted accounting principles?


Lakeside Electric purchased a truck for $38,600 to transport equipment to various job sites. For this purpose, storage bins were welded to the truck bed at a cost of $1,700. Doug Lombardi, controller of Lakeside, estimates the useful life of the truck to be 5 years and the residual value to be $1,000. Using the double-declining balance method, the depreciation expense on the truck for its second year of use is


Albright Company uses the sum-of-the-years’-digits (SYD) method of depreciation. On January 1, the company purchased a machine for $50,000. It had an estimated life of 5 years and no residual value. Depreciation for the first year would be


When a fixed plant asset with a 5-year estimated useful life is sold during the second year, how would the use of an accelerated depreciation method instead of the straight-line method affect the gain or loss on the sale of the fixed plant asset? Gain.. Loss


Which one of the following methods of depreciation will result in the lowest reported net income in the early life of a depreciable asset?


Silken, Inc., a distributor of silk goods, is in its first year of operation. The company has purchased ten computers at $3,500 each with an estimated life of 6 years; five desks at $500 each with an estimated life of 10 years; and two word processors at $300 each, with an estimated life of 4 years. No residual value is anticipated for any of these assets. Silken wants to adopt a depreciation method that will be easy to use and reflect an appropriate depreciation expense for the business each accounting period. The most appropriate method would be


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