CHAPTER 9
Plant Assets, Natural Resources,
and Intangible Assets
ASSIGNMENT CLASSIFICATION TABLE
Learning Objectives
Questions
Brief
Exercises
Do It!
Exercises
B
Problems
1. Describe how the historical cost
principle applies to plant
assets.
1, 2, 3
1, 2
1
1, 2, 3
1B
2. Explain the concept of
depreciation and how to
compute it.
4, 5, 6,
7, 8, 21,
22, 23
3, 4, 5,
6 ,7
2, 3
4, 5, 6,
7, 8
2B, 3B,
4B, 5B
3. Distinguish between revenue
and capital expenditures, and
explain the entries for each.
9, 24
8
4. Explain how to account for
the disposal of a plant asset.
10, 11
9, 10
4
9, 10
5B, 6B
5. Compute periodic depletion
of natural resources.
12, 13
11
11
6. Explain the basic issues
related to accounting for
intangible assets.
14, 15, 16,
17, 18, 19
12
5
12, 13
7B, 8B
7. Indicate how plant assets,
natural resources, and
intangible assets are
reported.
20
13, 14
14
5B, 7B, 9B
*8. Explain how to account
for the exchange of plant
assets.
25, 26
15, 16
15, 16
ASSIGNMENT CHARACTERISTICS TABLE
Problem
Number
Description
Difficulty
Level
Time
Allotted (min.)
1A
Determine acquisition costs of land and building.
Simple
20–30
2A
Compute depreciation under different methods.
Simple
30–40
3A
Compute depreciation under different methods.
Moderate
30–40
4A
Calculate revisions to depreciation expense.
Moderate
20–30
5A
Journalize a series of equipment transactions related to
purchase, sale, retirement, and depreciation.
Moderate
40–50
6A
Record disposals.
Simple
30–40
7A
Prepare entries to record transactions related to acquisition
and amortization of intangibles; prepare the intangible
assets section.
Moderate
30–40
8A
Prepare entries to correct errors made in recording and
amortizing intangible assets.
Moderate
30–40
9A
Calculate and comment on asset turnover.
Moderate
5–10
1B
Determine acquisition costs of land and building.
Simple
20–30
2B
Compute depreciation under different methods.
Simple
30–40
3B
Compute depreciation under different methods.
Moderate
30–40
4B
Calculate revisions to depreciation expense.
Moderate
20–30
5B
Journalize a series of equipment transactions related to
purchase, sale, retirement, and depreciation.
Moderate
40–50
6B
Record disposals.
Simple
30–40
7B
Prepare entries to record transactions related to acquisition
and amortization of intangibles; prepare the intangible
assets section.
Moderate
30–40
8B
Prepare entries to correct errors made in recording and
amortizing intangible assets.
Moderate
30–40
9B
Calculate and comment on asset turnover.
Moderate
5–10
WEYGANDT FINANCIAL ACCOUNTING 9E
CHAPTER 9
PLANT ASSETS, NATURAL RESOURCES,
AND INTANGIBLE ASSETS
Number
LO
BT
Difficulty
Time (min.)
BE1
1
AP
Simple
2–4
BE2
1
AP
Simple
1–2
BE3
2
AP
Simple
2–4
BE4
2
E
Moderate
4–6
BE5
2
AP
Simple
4–6
BE6
2
AP
Simple
2–4
BE7
2
AN
Moderate
4–6
BE8
3
AP
Simple
2–4
BE9
4
AP
Simple
4–6
BE10
4
AP
Simple
4–6
BE11
5
AP
Simple
4–6
BE12
6
AP
Simple
2–4
BE13
7
AP
Simple
4–6
BE14
7
AP
Simple
2–4
BE15
8
AP
Simple
4–6
BE16
8
AP
Simple
4–6
DI1
1
C
Simple
4–6
DI2
2
AP
Simple
2–4
DI3
2
AP
Simple
6–8
DI4
DI5
4
6
AP
K
Simple
Simple
2–4
2–4
EX1
1
C
Simple
6–8
EX2
1
AP
Simple
4–6
EX3
1
AP
Simple
4–6
EX4
2
C
Simple
4–6
EX5
2
AP
Simple
6–8
EX6
2
AP
Simple
8–10
EX7
2
AP
Simple
10–12
EX8
2
AN
Moderate
8–10
PLANT ASSETS, NATURAL RESOURCES, AND INTANGIBLE
ASSETS (Continued)
Number
LO
BT
Difficulty
Time (min.)
EX9
4
AP
Moderate
8–10
EX10
4
AP
Moderate
10–12
EX11
5
AP
Simple
6–8
EX12
6
AP
Simple
4–6
EX13
6
AP
Simple
8–10
EX14
7
AP
Simple
2–4
EX15
8
AP
Moderate
8–10
EX16
8
AP
Moderate
8–10
P1A
1
C
Simple
20–30
P2A
2
AP
Simple
30–40
P3A
2
AN
Moderate
30–40
P4A
2
AP
Moderate
20–30
P5A
2, 4, 7
AP
Moderate
40–50
P6A
4
AP
Simple
30–40
P7A
6, 7
AP
Moderate
30–40
P8A
6
AP
Moderate
30–40
P9A
7
AN
Moderate
5–10
P1B
1
C
Simple
20–30
P2B
2
AP
Simple
30–40
P3B
2
AN
Moderate
30–40
P4B
2
AP
Moderate
20–30
P5B
2, 4, 7
AP
Moderate
40–50
P6B
4
AP
Simple
30–40
P7B
6, 7
AP
Moderate
30–40
P8B
6
AP
Moderate
30–40
P9B
7
AN
Moderate
5–10
BYP1
2, 7
AN
Simple
15–20
BYP2
7
AN, E
Simple
10–15
BYP3
7
AN, E
Simple
10–15
BYP4
2
C
Simple
10–15
BYP5
2
AP, E
Moderate
20–25
BYP6
2
C
Simple
5–10
BYP7
2
E
Simple
10–15
BYP8
6
K
Simple
5–10
BYP9
1, 6
AP
Simple
10–15
BLOOM’S TAXONOMY TABLE
Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Solutions Manual (For Instructor Use Only) 9-5
Correlation Chart between Bloom’s Taxonomy, Study Objectives and End–of-Chapter Exercises and Problems
Study Objective
Knowledge
Comprehension
Application
Analysis
Synthesis
Evaluation
1. Describe how the historical cost
principle applies to plant assets.
Q9-1
Q9-2
Q9-3
DI9-1
E9-1
P9–1A
P9–1B
BE9-1
BE9-2
E9-2
E9-3
2. Explain the concept of
depreciation and how to
compute it.
Q9-5
Q9-4
Q9-6
Q9-7
Q9-8
Q9–21
Q9–22
Q9–23
E9-4
BE9-3
BE9-5
BE9-6
DI9-2
DI9-3
E9-5
E9-6
E9-7
P9–2A
P9–4A
P9–5A
P9–2B
P9–4B
P9–4B
P9–5B
BE9-7
E9-8
P9–3A
P9–3B
BE9-4
3. Distinguish between revenue and
capital expenditures, and explain
the entries for each.
Q9-9
Q9–24
BE9-8
4. Explain how to account for the
disposal of a plant asset.
Q9–10
Q9–11
BE9-9
BE9-10
DI9-4
E9-9
E9–10
P9–5A
P9–6A
P9–5B
P9–6B
5. Compute periodic depletion of
natural resources.
Q9–12
Q9–13
BE9-11
E9–11
6. Explain the basic issues related
to accounting for intangible assets.
Q9–18
DI9-5
Q9–14
Q9–15
Q9–16
Q9–17
Q9–19
BE9-12
E9–12
E9–13
P9–7A
P9–8A
P9–7B
P9–8B
7. Indicate how plant assets, natural
resources, and intangible assets
are reported.
Q9–20
BE9-13
BE9-14
E9–14
P9–5A
P9–7A
P9–5B
P9–7B
P9–9A
P9–9B
*8. Explain how to account for the
exchange of plant assets.
Q9-25
Q9-26
BE9-15
BE9-16
E9–15
E9–16
Broadening Your Perspective
Real-World Focus
Communication
Decision Making Across
the Organization
FASB Codification
Financial Reporting
Comp. Analysis
Comp. Analysis
Decision Making
Across the
Organization
Ethics Case
All About You
ANSWERS TO QUESTIONS
1. For plant assets, the historical cost principle means that cost consists of all expenditures necessary to
3. (a) When only the land is to be used, all demolition and removal costs of the building less any
intended use.
(b) When both the land and building are to be used, necessary costs of the building include
plumbing.
4. You should explain to the president that depreciation is a process of allocating the cost of a plant
5. (a) Salvage value, also called residual value, is the expected value of the asset at the end of its
useful life.
balance method.
6. (a) Useful life is expressed in years under the straight-line method and in units of activity under
the units-of-activity method.
7. The effects of the three methods on annual depreciation expense are: Straight-line—constant
8. A revision of depreciation is made in current and future years but not retroactively. The rationale
statements.
9. Revenue expenditures are ordinary repairs made to maintain the operating efficiency and productive
11. The plant asset and its accumulated depreciation should continue to be reported on the balance
sheet without further depreciation adjustment until the asset is retired. Reporting the asset and
the plant asset exceed its cost.
Questions Chapter 9 (Continued)
12. Natural resources consist of underground deposits of oil, gas, and minerals, and standing timber.
13. Depletion is the allocation of the cost of natural resources to expense in a rational and systematic
14. The terms depreciation, depletion, and amortization are all concerned with allocating the cost of
15. The intern is not correct. The cost of an intangible asset should be amortized over that asset’s
16. The favorable attributes which could result in goodwill include exceptional management, desirable
with labor unions.
17. Goodwill is the value of many favorable attributes that are intertwined in the business enterprise.
fair value of its net assets.
18. Goodwill is recorded only when there is a transaction that involves the purchase of an entire
19. Research and development costs present several accounting problems. It is sometimes difficult
to assign the costs to specific projects, and there are uncertainties in identifying the extent and
timing of future benefits. As a result, the FASB requires that research and development costs be
recorded as an expense when incurred.
20. McDonald’s asset turnover ratio is computed as follows:
assets total Average
sales Net
=
$20.5 billion
$28.9 billion
= .71 times
21. Since Stark uses the straight-line depreciation method, its depreciation expense will be lower in
the early years of an asset’s useful life as compared to using an accelerated method. Zuber’s
depreciation expense in the early years of an asset’s useful life will be higher as compared to
the straight-line method. Stark’s net income will be higher than Zuber’s in the first few years of
the asset’s useful life. And, the reverse will be true late in an asset’s useful life.
Questions Chapter 9 (Continued)
22. Yes, the tax regulations of the IRS allow a company to use a different depreciation method on the
tax return than is used in preparing financial statements. Gomez Corporation uses an accelerated
depreciation method for tax purposes to minimize its income taxes and thereby the cash outflow
for taxes.
23. By selecting a longer estimated useful life, Ace Corp. is spreading the plant asset’s cost over a
longer period of time. The depreciation expense reported in each period is lower and net income is
higher. Liu’s choice of a shorter estimated useful life will result in higher depreciation expense
reported in each period and lower net income.
24. Expensing these costs will make current period income lower but future period income higher because
there will be no additional depreciation expense in future periods. If the costs are ordinary repairs,
they should be expensed.
26. Yes, Unruh should recognize a gain equal to the difference between the fair value of the old
machine and its book value. If the fair value of the old machine is less than its book value, Unruh
should recognize a loss equal to the difference between the two amounts.
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 9-1
BRIEF EXERCISE 9-2
The cost of the truck is $32,500 (cash price $30,000 + sales tax $2,100 + painting
BRIEF EXERCISE 9-3
Depreciable cost of $32,000, or ($38,000 – $6,000). With a four-year useful life,
first and second years.
BRIEF EXERCISE 9-4
BRIEF EXERCISE 9-5
Book Value
X
Rate
=
Depreciation
Year 1
Year 2
$38,000
($38,000 – $19,000)
50%
50%
$19,000
$ 9,500
BRIEF EXERCISE 9-6
The depreciation cost per unit is 26 cents per mile computed as follows:
Depreciable cost ($39,500 – $500) ÷ 150,000 = $.26
Year 1 30,000 miles X $.26 = $7,800
Year 2 20,000 miles X $.26 = $5,200
BRIEF EXERCISE 9-7
Book value, 1/1/15 ……………………………………………………………….. $23,000
Less: Salvage value ……………………………………………………………. 2,000
BRIEF EXERCISE 9-8
BRIEF EXERCISE 9-9
(a) Accumulated Depreciation—
(b) Accumulated Depreciation—