Chapter 18 ("Property, Plant, and Equipment")

Question 1

Under MACRS, property is separated into defined classes. For tangible personal property, there are six classes of property. However, almost all personal property falls in three of those classes. Those three are:
-
-
-  	
Under MACRS, the recovery periods for real property are:
-
-
-

Answer 1

5-year class—automobiles, lightweight trucks, computers, and certain special-purpose property.

7-year class—office furniture and fixtures and most manufacturing equipment.

10-year class—special purpose property, such as equipment used in the manufacture of food and tobacco products.

residential rental buildings—27.5 years,

nonresidential buildings (office buildings) placed in service after May 12, 1993—39 years,

nonresidential buildings placed in service on or before May 12, 1993—31.5 years.

Question 2

For federal income tax purposes, the depletion expense deducted from income is the larger of cost depletion or ___________.

• amount per table provided with forms
• percentage depletion
• units-of-production times the calculated rate per unit
• number of units extracted times the calculated rate per unit

Answer 2

-percentage depletion

Percentage depletion for a property is calculated by multiplying the gross income from the sale of the natural resource by a percentage. The percentage depends on the specific natural resource.

In 2013, a mining company has sales of $1,800,000 for ore produced from a mine. For tax purposes, the book value (capitalized costs, less depletion taken in prior years) of the minerals at the beginning of the year was $16,000. The allowable percentage depletion rate for the minerals produced is 15 percent. The company will deduct $270,000 on its federal income tax return ($1,800,000 × 0.15 = $270,000). In future years, there will be no allowable cost depletion, but percentage depletion may continue to be taken even though the book value for tax purposes is zero.

Question 3

Under MACRS, the highest percent—resulting in the highest deprecation expense—occurs during which year?
first
second
third
fourth

Answer 3

first

MACRSのチャートを見ると２年目が一番％高い。
しかし、、、

Question 4

Land purchased for a future building site or as an investment would not be shown in the Property, Plant, and Equipment section of the balance sheet.
True
False

Answer 4

True

Question 5

Accumulated Depreciation is classified as a contra asset account.
True
False

Answer 5

True

Question 6

The entry to record the amortization of acquisition cost of an intangible asset includes a credit directly to the intangible asset account.
True
False

Answer 6

True

Question 7

Financial accounting rules (GAAP) and federal income tax rules differ for handling depreciation on the trade-in of an asset.

どう異なる？

Answer 7

GAAP: record only a loss

Income Tax Rules: record neither gain nor loss

Question 8

For financial accounting purposes, when an asset is traded in for a similar asset, a gain is reported if the trade-in allowance exceeds the book value of the asset traded in.
True
False

Answer 8

False

Question 9

All of the following refer to the handling of a decline in value of property, plant, and equipment except:

• depreciation.
• impairment.
• realization principle.
• conservatism constraint.

Answer 9

-depreciation.

Question 10

The balance of an Accumulated Depletion account is subtracted from the related natural resource account to determine the book value of the natural resource.
True
False

Answer 10

True

Question 11

Which of the following abides by the principle of conservatism regarding trade-ins?
recording only the loss
recording only the gain
recording both the loss and the gain
recording neither the loss nor the gain

Answer 11

recording only the loss

Question 12

When an asset is sold, the first thing an accountant must do is record the depreciation to the date of sale.
True
False

Answer 12

True

Question 13

Use of the sum-of-the-years’-digits method of depreciation results in lower depreciation charges in the early years of an asset’s life and higher charges in the later years.
True
False

Answer 13

False

Question 14

The entry to record the sale of equipment used in a business may include a debit to
the Equipment account.
the Gain on Sale of Equipment account.
the Accumulated Depreciation—Equipment account.
Depreciation Expense account.

Answer 14

the Accumulated Depreciation—Equipment account.

Question 15

Dom's Delivery purchased a van for $32,000. The transportation charges were $400, sales tax was $2,240, and the license cost $250. Special shelving was installed in the van for $4,300. In addition, Dom had the company name painted on the doors. This cost the company $1,250. The total cost of the van to record in the proper asset account is
$40,190.
$40,440.
$38,940.
$39,190.

Answer 15

$40,190.

license costは含まれない。なんでかしらんけど。

Question 16

The acquisition cost of an intangible asset should be charged to expense over the shorter of its legal or useful life.
True
False

Answer 16

True
よくわからん
Learning Objective: 18-07 Recognize asset impairment and understand the general concepts of accounting for impairment.

Question 17

The steps in the process of determining an impairment loss in their proper order are:
-apply the recoverability test, review circumstances that suggest impairment, compute the amount of the impairment.

• apply the recoverability test, review circumstances that suggest impairment, record the amount of the impairment.
• review circumstances that suggest impairment, apply the recoverability test, and compute the amount of the impairment.
• review circumstances that suggest impairment, apply the recoverability test, record the amount of the impairment.

Answer 17

review circumstances that suggest impairment, apply the recoverability test, and compute the amount of the impairment.

Question 18

Assume that a business trades in an old cash register for a new one. Under the income tax method,

• a gain may be recognized, but a loss cannot be recorded.
• the cost of the new asset is recorded as the cash paid for the new asset.
• the asset account is debited for the difference between the original cost of the old asset and the fair market value of the new asset.
• the cost of the new asset is recorded as the book value of the old asset plus the cash amount paid or to be paid.

Answer 18

-the cost of the new asset is recorded as the book value of the old asset plus the cash amount paid or to be paid.