Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 10
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.
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
5. The Accumulated Depreciation—Machinery account is a contra asset account with a
credit balance that cannot be used to buy anything. The balance of the Accumulated
6. The Modified Accelerated Cost Recovery System is not generally acceptable for financial
8. Ordinary repairs are made to keep a plant asset in normal, good operating condition, and
9. A company might sell or exchange an asset when it reaches the end of its useful life, or
10. The process of allocating the cost of natural resources to expense over the periods
11. No, depletion expense should be calculated on the units that are extracted (similar to the
units-of–production basis) and sold.
12. An intangible asset: (1) has no physical existence; (2) derives value from the unique
13. Intangible assets are generally recorded at their cost and amortized over their predicted
useful life. (However, some costs are not included, such as the research and
14. A company has goodwill when its value exceeds the value of its individual assets and
15. No; this type of goodwill would not be amortized. Instead, the FASB (SFAS 142) requires
that goodwill be annually tested for impairment. If the book value of goodwill does not
16. Total asset turnover is calculated by dividing net sales by average total assets.
17. The word “net” means that Apple is reporting its property and equipment after deducting
accumulated depreciation to date.
18. Google lists “Property and equipment, net” on the balance sheet. The net book value of
these assets is $29,016 million.
20. Samsung reports the following long-term assets that are discussed in this chapter:
Property, plant and equipment; Intangible assets.
21. (a) 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
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 10
617
QUICK STUDIES
Quick Study 10-1 (10 minutes)
Quick Study 10-2 (10 minutes)
Expensed or Capitalized Asset Category (if any) .
1. Expensed —
2. Capitalized Equipment
Quick Study 10-3 (10 minutes)
Quick Study 10-4 (10 minutes)
618
Quick Study 10-5 (10 minutes)
Quick Study 10-6 (10 minutes)
Note: Double-declining-balance rate = (100% / 8 years) x 2 = 25%
First year:
Quick Study 10-7 (10 minutes)
619
Quick Study 10-8 (10 minutes)
1. (a) CE Capital expenditure
2.
(a) Equipment……………………………………………………….
40,000
Quick Study 10-9 (15 minutes)
1.
2.
3.
Quick Study 10-10 (10 minutes)
1.
Ore Mine ………………………………………………………………..
1,800,000
1,800,000
Quick Study 10-11 (10 minutes)
a. Oil well NR
Quick Study 10-12 (10 minutes)
1.
2.
Dec. 31
Amortization Expense–Leasehold Improvements …………
13,125
621
Quick Study 10-13 (10 minutes)
Quick Study 10-14A (10 minutes)
Quick Study 10-15 (10 minutes)
a. Accounting for plant assets involving cost determination,
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 10
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EXERCISES
Exercise 10-1 (15 minutes)
Invoice price of machine …………………………………………………
$ 12,500
Exercise 10-2 (15 minutes)
Cost of land
Purchase price for land …………………………………………………..
$ 280,000
Purchase price for old building …………………………..
110,000
Total construction costs …………………………………………………
Land Improvements ……………………………………………….
Less discount (.02 x $12,500) ………………………………………….
Assembly ……………………………………………………………………….
Materials used in adjusting ……………………………………………..
Exercise 10-3 (20 minutes)
Allocation of total cost
Appraised
Value
Percent
of Total
Applying %
to Cost
Apportioned
Cost
Land …………………………
$157,040
40%
$395,380 x .40
$158,152
15
59,307
$395,380 x .45
$392,600
$395,380
395,380
Exercise 10-4 (10 minutes)
Exercise 10-5 (10 minutes)
Units–of-production
624
Exercise 10-6 (15 minutes)
Double-declining-balance
Exercise 10-7 (15 minutes)
Exercise 10-8 (20 minutes)
Double-declining-balance depreciation
625
Exercise 10-9 (30 minutes)
Straight-line depreciation
Income
before
Depreciation
Depreciation
Expense*
Net
Income
Exercise 10-10 (30 minutes)
Double-declining-balance depreciation
Income
before
Depreciation
Depreciation
Expense*
Net
Income
626
Exercise 10-11 (10 minutes)
Straight-line depreciation for 2016
Exercise 10-12 (15 minutes)
Double-declining-balance depreciation for 2016 and 2017:
Rate = (100% / 5 years) x 2 = 40%
Exercise 10-13 (15 minutes)
1.
Original cost of machine …………………………………………………….
$ 23,860
[($23,860 – $2,400) / 4 years] x 2 years …………………………..
$ 13,130
2.
$ 13,130
627
Exercise 10-14 (15 minutes)
1.
Equipment ……………………………………………………………
2.
Repairs Expense …………………………………………………..
6,250
3.
Equipment …………………………..……………………………….
Exercise 10-15 (25 minutes)
2. Entry to record the extraordinary repairs
3.
Cost of building
Before repairs……………………………………………………….
$572,000
Add cost of repairs …………………………………………………
$640,350
Less accumulated depreciation …………………………..
4.
Revised book value of building (part 3) ………………………
$211,350
New estimate of useful life (20 – 15 + 5) ………………………
Depreciation Expense …………………………………………….
628
Exercise 10-16 (20 minutes)
1. Disposed at no value
Jan. 3
Loss on Disposal of Milling Machine …………………….
68,000
2. Sold for $35,000 cash
Jan. 3
Cash …………………………..……………………………………….
35,000
Loss on Sale of Milling Machine …………………………..
33,000
3. Sold for $68,000 cash
Jan. 3
Cash …………………………..……………………………………….
68,000
4. Sold for $80,000 cash
Jan. 3
Cash …………………………..……………………………………….
80,000
629
Exercise 10-17 (25 minutes)
2021
July 1
1. Sold for $45,500 cash
July 1
Cash …………………………..……………………………………….
45,500
67,500
2. Destroyed by fire with $25,000 cash insurance settlement
July 1
Cash …………………………..……………………………………….
25,000
12,500
Exercise 10-18 (10 minutes)
630
Exercise 10-19 (10 minutes)
Jan. 1
Copyright ……………………………………………………….
418,000
Exercise 10-20 (10 minutes)
Exercise 10-21 (15 minutes)
Exercise 10-22 (15 minutes)
631
Exercise 10-23A (15 minutes)
Exercise 10-24A (25 minutes)
1. Sold for $18,250 cash
Jan. 2
Cash …………………………..……………………………………….
18,250
2. $25,000 trade-in allowance exceeds book value (yielding a gain)
Jan. 2
60,200
24,625
3. $15,000 trade-in allowance is less than book value (yielding a loss)
Jan. 2
60,200
632
Exercise 10-25 (20 minutes)
(Amounts for this exercise are in euros millions)
3.
Cash ……………………………………………………………………..
720
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 10
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PROBLEM SET A
Problem 10-1A (50 minutes)
Part 1
Estimated
Market Value
Percent
of Total
Apportioned
Cost
Building ……………………..
$508,800
53%
$477,000
Part 2
Year 2017 straight-line depreciation on building
Part 3
Year 2017 double-declining-balance depreciation on land improvements
31
634
Problem 10-2A (25 minutes)
Year
Straight–Linea
Units–of-Productionb
Double-Declining-
Balancec
bUnits-of-production:
cDouble-declining-balance: