CHAPTER 9
Plant Assets, Natural Resources,
and Intangible Assets
ASSIGNMENT CLASSIFICATION TABLE
Learning Objectives
Questions
Brief
Exercises
Do It!
A
Problems
1. Explain the accounting for
plant asset expenditures.
1, 2, 3, 9,
24
1, 2, 3
1
1A
2. Apply depreciation methods
to plant assets.
4, 5, 6,
7, 8, 21,
22, 23
4, 5,
6 ,7, 8
2a, 2b
2A, 3A,
4A, 5A
10, 11
9, 10
3
9, 10
5A, 6A
12, 13, 14,
15, 16,
17, 18, 19
4
7A, 8A
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
Compute depreciation under different methods.
4A
Calculate revisions to depreciation expense.
20–30
purchase, sale, retirement, and depreciation.
6A
Record disposals.
Simple
30–40
assets section.
amortizing intangible assets.
9A
Calculate and comment on asset turnover.
WEYGANDT FINANCIAL ACCOUNTING MANAGERIAL 2E
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
BE9
3
AP
Simple
4–6
BE10
3
AP
Simple
4–6
BE11
4
AP
Simple
4–6
BE12
4
AP
Simple
2–4
BE13
5
AP
Simple
4–6
BE14
5
AP
Simple
2–4
*BE15
6
AP
Simple
4–6
*BE16
6
AP
Simple
4–6
DI1
1
C
Simple
4–6
DI2a
2
AP
Simple
2–4
DI2b
2
AP
Simple
DI3
3
AP
6–8
DI5
5
AP
Simple
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
EX8
2
AN
8–10
BE3
1
AP
Simple
2–4
BE4
2
AP
Simple
2–4
BE5
2
E
4–6
BE6
2
AP
Simple
4–6
BE7
2
AP
Simple
2–4
BE8
2
AN
4–6
PLANT ASSETS, NATURAL RESOURCES, AND INTANGIBLE
ASSETS (Continued)
Number
LO
BT
Difficulty
Time (min.)
EX9
3
AP
Moderate
8–10
EX10
3
AP
Moderate
10–12
EX11
4
AP
Simple
6–8
EX12
4
AP
Simple
4–6
EX13
4
AP
Simple
8–10
EX14
5
AP
Simple
2–4
EX15
6
AP
Moderate
8–10
EX16
6
AP
Moderate
8–10
BYP2
5
AN, E
Simple
10–15
BYP3
5
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
4
K
Simple
5–10
BYP9
AP
Simple
10–15
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
AP
Moderate
40–50
P6A
3
AP
Simple
30–40
P7A
AP
Moderate
30–40
P8A
4
AP
Moderate
30–40
P9A
5
AN
Moderate
5–10
BYP1
AN
Simple
15–20
BLOOM’ S TAXONOMY TABLE
Correlation Chart between Bloom’s Taxonomy, Study Objectives and End–of–Chapter Exercises and Problems
Study Objective
Knowledge
Comprehension
Application
Analysis
Synthesis
Evaluation
1. Explain the accounting for plant
asset expenditures.
Q9-1
Q9-2
Q9-3
Q9-9
Q9–24
DI9-1
E9-1
P9–1A
BE9-1
BE9-2
BE9-3
E9-2
E9-3
2. Apply depreciation methods to
plant assets.
Q9-5
Q9-4
Q9-6
Q9-7
Q9-8
Q9–21
Q9–22
Q9–23
E9-4
BE9-4
BE9-6
BE9-7
DI9-2a
DI9-2b
E9-5
E9-6
E9-7
P9–2A
P9–4A
P9–5A
BE9-8
E9-8
P9–3A
BE9-5
Communication
Comp. Analysis
Decision Making
ANSWERS TO QUESTIONS
1. For plant assets, the historical cost principle means that cost consists of all expenditures necessary to
5. (a) Salvage value, also called residual value, is the expected value of the asset at the end of its
9. Revenue expenditures are ordinary repairs made to maintain the operating efficiency and productive
Questions Chapter 9 (Continued)
12. Natural resources consist of underground deposits of oil, gas, and minerals, and standing timber.
17. Goodwill is the value of many favorable attributes that are intertwined in the business enterprise.
20. McDonald’s asset turnover ratio is computed as follows:
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
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 9-1
BRIEF EXERCISE 9-2
BRIEF EXERCISE 9-3
BRIEF EXERCISE 9-4
Depreciable cost of $32,000, or ($38,000 – $6,000). With a four-year useful life,
BRIEF EXERCISE 9-5
It is likely that management requested this accounting treatment to boost
BRIEF EXERCISE 9-6
BRIEF EXERCISE 9-7
The depreciation cost per unit is 26 cents per mile computed as follows:
BRIEF EXERCISE 9-8
Book value, 1/1/17 ……………………………………………………………….. $23,000
BRIEF EXERCISE 9-9
BRIEF EXERCISE 9-9 (Continued)
BRIEF EXERCISE 9-10
(a) Depreciation Expense ……………………………………….. 5,250
BRIEF EXERCISE 9-11
(a) Depletion cost per unit = $7,000,000 ÷ 35,000,000 = $.20 depletion cost
per ton
BRIEF EXERCISE 9-12
BRIEF EXERCISE 9-13
DENT COMPANY
Balance Sheet (partial)
December 31, 2017
BRIEF EXERCISE 9-14
*BRIEF EXERCISE 9-15
*BRIEF EXERCISE 9-15 (Continued)
Fair value of old delivery
*BRIEF EXERCISE 9-16
Equipment (new) ……………………………………………………… 38,000
SOLUTIONS FOR DO IT! REVIEW EXERCISES
DO IT! 9-1
The following four items are expenditures necessary to acquire the truck
and get it ready for use:
DO IT! 9-2A
DO IT! 9-2B
DO IT! 9-4
1. Intangible assets
DO IT! 9-5
SOLUTIONS TO EXERCISES
EXERCISE 9-1
(b) 1. Land
EXERCISE 9-2
EXERCISE 9-3
(a) Cost of land
EXERCISE 9-4
1. False. Depreciation is a process of cost allocation, not asset valuation.
EXERCISE 9-5
(b)
Computation
End of Year
EXERCISE 9-6
(a) Straight-line method:
EXERCISE 9-7
EXERCISE 9-8
(a)
Type of Asset
Building
Warehouse
EXERCISE 9-9
EXERCISE 9-10
(a) Cash ………………………………………………………………. 31,000
EXERCISE 9-10 (Continued)
(c) Cash ……………………………………………………….……….. 11,000
EXERCISE 9-11
(a) Dec. 31 Inventory …………………………………………… 80,000
EXERCISE 9-13
1/2/17 Patents …………………………………………………. 595,000
EXERCISE 9-14
*EXERCISE 9-15
(b) Equipment (new) ……………………………………………….. 14,000
*EXERCISE 9-16
(a) Equipment (new) ………………………………………………. 3,000
(b) Equipment (new) ………………………………………………. 3,000
SOLUTIONS TO PROBLEMS
PROBLEM 9-1A
PROBLEM 9-2A
(a)
Year
Computation
Accumulated
Depreciation
12/31
(b)
Year
Computation
Expense
PROBLEM 9-3A
(2) Recorded cost ………………………………………………………… $ 50,000
(2)
Book Value at
Beginning
of Year
DDB
Rate
Annual Depreciation
Expense
Accumulated
Depreciation
PROBLEM 9-3A (Continued)
(3) Depreciation cost per unit = ($180,000 – $10,000)/125,000 units =
$1.36 per unit.
Annual Depreciation Expense
(c) The declining–balance method reports the highest amount of depreciation
PROBLEM 9-4A
Year
Depreciation
Expense
Accumulated
Depreciation
PROBLEM 9-5A
(a) Apr. 1 Land…………………………………………. 2,130,000
PROBLEM 9-5A (Continued)
(b) Dec. 31 Depreciation Expense ………………… 570,000
(c) GRAND COMPANY
Partial Balance Sheet
December 31, 2018
PROBLEM 9-5A (Continued)
Land
Equipment
PROBLEM 9-6A
(a) Accumulated Depreciation—Equipment ……………… 50,000
PROBLEM 9-7A
(a) Jan. 2 Patents …………………………………………….. 27,000
(c) Intangible Assets
PROBLEM 9-8A
1. Research and Development Expense ………………. 136,000
PROBLEM 9-9A
(a)
LaPorta
Lott
CP9COMPREHENSIVE PROBLEM SOLUTION
(a) 1. Equipment …………………………………………………… 22,800
COMPREHENSIVE PROBLEM (Continued)
COMPREHENSIVE PROBLEM (Continued)
(b) HASSELLHOUF COMPANY
Trial Balance
December 31, 2017
COMPREHENSIVE PROBLEM (Continued)
(c) HASSELLHOUF COMPANY
Income Statement
For the Year Ended December 31, 2017
HASSELLHOUF COMPANY
Retained Earnings Statement
For the Year Ended December 31, 2017
COMPREHENSIVE PROBLEM (Continued)
(d) HASSELLHOUF COMPANY
Balance Sheet
December 31, 2017
Liabilities and Stockholders’ Equity
BYP 9-1 FINANCIAL REPORTING PROBLEM
BYP 9-2 COMPARATIVE ANALYSIS PROBLEM
(a)
PepsiCo
Coca-Cola
BYP 9-3 COMPARATIVE ANALYSIS PROBLEM
(a)
Amazon
Wal-Mart
BYP 9-4 REAL-WORLD FOCUS
BYP 9-5 DECISION MAKING ACROSS THE ORGANIZATION
(a) Pinson Company—Straight-line method
Year
Asset
Computation
Annual
Depreciation
Accumulated
Depreciation
(b)
Year
Pinson
Company
Net Income
Estes
Company
Net Income
As Adjusted
Computations for Estes Company
BYP 9-5 (Continued)
BYP 9-6 COMMUNICATION ACTIVITY
Answers will depend on the position selected by the student. Some points
that should be considered include:
1. Some relatively small companies may spend less on R&D because they
BYP 9-7 ETHICS CASE
(a) The stakeholders in this situation are:
(c) Income before income taxes in the year of change is increased $160,000
by implementing the president’s proposed changes.
BYP 9-8 ALL ABOUT YOU
BYP 9-9 FASB CODIFICATION ACTIVITY
(a) Capitalize is used to indicate that the cost would be recorded as the
IFRS EXERCISES
IFRS9-1
Component depreciation is a method of allocating the cost of a plant asset
IFRS9-4 INTERNATIONAL FINANCIAL STATEMENT ANALYSIS