10(b) Flashcards
Regis Inc. bought a machine on January 1, 2016 for $800,000. The machine had an expected life of 20 years and was expected to have a salvage value of $80,000 on July 1, 2026. The company reviewed the potential of the machine and determined that it’s future net cash flow to $400,000 and it’s fair value was $280,000. If the company does not plan to dispose of the machine, what should Regis record as an impairment loss on July 1, 2026.
$142,000
(800,000 - 80,000) / 240 = 3,000
800,000 - (3,000 * 126) = 422,000
4222,000 - 280,000 = 142,000
Little house Inc. purchased equipment for $1,400,000 in 2025. Three years later, the equipment has accumulated depreciation of $550,000 in little house has concerns that the equipment has been impaired. future cash flows are estimated to be $880,000. The current fair value of the equipment is estimated to be approximately $700,000. The journal entry to record the impairment loss on the equipment will include
No impairment has occurred, so no journal entry is required
1,400,000 - 550,000 = 850,000
850,000 < 880,000
Bart incorporation acquired a coal mine for $1,500,000. Intangible development costs totaled $360,000. After extraction is completed, Barton must restore the property. The estimated fair value of the obligation is $180,000., after which the company estimates that it can be sold for $510,000. Bar estimates that 6000 tons of coal can be extracted. If 900 tons are extracted the first year, which of the following would be included in the journal entry to record the depletion?
debit to inventory for $229,500
(1,500,000 + 360,000 + 180,000 - 510,000) / 6000 = 255 * 900
torque co has equipment with a caring amount of $2,400,000. The expected future net cash flows from the equipment are $2,445,000, and it’s fair about it is $2,040,000. The equipment is expected to be used in operations in the future. What amount (if any) should torque report as an impairment loss on the equipment?
No impairment should be reported
2,400,000 > 2,445,000
in March 2025, Mallory mines Co. purchased a coal mine for $8 million. Removable calls estimated at 1,500,000 tons. Mallory is required to restore the land at an estimated cost of $960,000, and the land should have a resale value of $840,000. The company incurred $2 million of developmental costs preparing the mind for production. In 2025, the 360,000 tons were removed, and 240,000 tons were sold. The total amount of depletion expense that Mallory should record for 2025 is
$1,619,200
(8,000,000+960,000-840,000+2,000,000)/1,500,000=6.7466….*240,000
in 2018, Jarret company purchased a track of land as a possible future plant site. In January 2026 valuable solar deposits were discovered on adjoining property and company immediately began explorations on its property. In December 2026, after incurring $480,000 in expiration cost, which were accumulated in an expense account, Jarret discovered Sulphur deposits appraised at $2,700,000 more than the value of the land. To record discovery of the deposits, Jared should
Debit $480,000 to an asset account
in January 2025, Jager corporation purchased a mineral mind for $5,100,000 with removable ore estimated by geological surveys at 2,000,000 tons. The property has an estimated value of $300,000 after the order has been extracted. The company incurred $1,500,000 of developmental costs preparing the mind for production. In 2025, 600,000 tons were removed, 480,000 tons were sold. What amount of depletion shit Jager expense for 2025?
$1,512,000
(5,100,000-300,000+1,500,000)/2,000,000=31.5
31.5*480,000=1,512,000
Porter resources company acquired a tract of land containing an extractable natural resource. Porter is required by its purchase contract to restore the land to a condition suitable for recreational use after it has extracted the natural resource. Geological surveys estimate that the recoverable reserves will be 2,500,000 tons and that the lane will have a value of $1 million after restoration. Relevant cost information follows:
Land $7,500,000
Estimated restoration costs $1,500,000
if Porter maintains no inventories of extracted material, what should be the charge to depletion expense per ton of extracted material?
$3.20
(7,500,000+1,500,000-1,000,000)/2,500,00 = 3.2
King corporation owns machinery with a book value of $760,000. At the end of the current year, it is estimated that the machinery will generate future cash flow flows of $700,000. If the machine has a fair value of $560,000 at the time, King should recognize a loss on impairment of
$200,000
760,000 > 700,000…
760,000-560,000=200,000
in 2025, Logan corporation acquired a mineral mind for $4 million of which $400,000 was ascribed to the value of the land after the minerals have been removed. Geological surveys have indicated that 10 million units of the mineral could be extracted. During 2025, 1,500,000 units were extracted, and 1,250,000 units were sold. What amount of depletion is expensed for 2025?
$450,000
(4,000,000 - 400,000)/10,000,000=3.6
3.6*1,250,000
usually, companies compute depletion for accounting purposes using
The units of production method
Hoksi corporation purchased equipment for $725,000 and 2025. Two years later, the equipment has accumulated depreciation of $225,000 in Hoksi has concerns that the equipment has been impaired. Future cash flows are estimated to be $480,000. The controller believes the current fair value of the equipment to be approximately $425,000. The journal entry to record the apparent loss on the equipment will include
Credit to accumulated depreciation – equipment for $75,000
of the following costs related to the development of natural resources (exploration costs, intangible development costs, acquisition costs, intangible equipment costs), which one does not part of depletion cost?
tangible equipment costs associated with machinery, used to extract the natural resource
