Solution Chapter 10- Accounting

9107 Words Jan 9th, 2012 37 Pages
Chapter 10

Plant Assets, Natural Resources, and Intangibles

QUESTIONS

1. A plant asset is tangible; it is used in the production or sale of other assets or services; and it has a useful life longer than one accounting period.

2. The cost of a plant asset includes all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use.

3. Land is an asset with an unlimited life and, therefore, is not subject to depreciation. Land improvements have limited lives and are subject to depreciation.

4. Often the lump-sum or basket purchase includes assets with different lives that must be depreciated separately. Sometimes the purchase may include land, which is never depreciated.

5.
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Financial statement users can use total asset turnover to evaluate the efficiency of a company in using its assets to generate sales.

17. Best Buy lists Land and buildings; Leasehold improvements; Fixtures and equipment; Property under capital lease. The book value of these assets is $2,938,000,000.

18. Circuit City calls its plant assets “Property and equipment, net of accumulated depreciation.” The book value of the property and equipment is $921,027,000.

19. The word “net” means that RadioShack is presenting its property, plant, and equipment after deducting accumulated depreciation to date.

20. Apple’s long-term assets discussed in this chapter are: Property, plant, and equipment, net; Goodwill; Acquired intangible assets, net.

QUICK STUDIES

Quick Study 10-1 (10 minutes)

Recorded cost = $350,000 + $10,000 + $4,000 + $21,000 = $385,000

Note: The $4,200 repair charge is an expense because it is not a normal and reasonable expenditure necessary to get the asset in place and ready for its intended use.

Quick Study 10-2 (10 minutes)

1. The main difference between plant assets and current assets is that current assets are consumed or converted into cash within a short period of time, while plant assets have a useful life of more than one accounting period.

2. The main difference between plant assets and inventory is that inventory is held for resale and plant assets are not.

3. The main
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