Plant Assets
What are Plant Assets?
Tangible assets used in a company's operations that have a useful life of more than one accounting period.
What are natural resources?
Assets that are physically consumed when used
Amortization is:
The cost is expensed over its estimated useful life
Flask Company reports net sales of $4,315 million; cost of goods sold of $2,808 million; net income of $283 million; and average total assets of $2,136. Compute its total asset turnover.
2.02
Flask Company reports net sales of $4,315 million; cost of goods sold of $2,808 million; net income of $283 million; and average total assets of $2,136. Compute the total asset turnover.
2.02
What are the four major classes to determine the cost of plant assets?
Machinery Equipment, Buildings, Land, Land Improvements.
How do you record depletion?
Debit Depletion Expense
Credit Accumulated Depletion
What are Intangible assets?
nonphysical assets that provide advantages to companies such as competitive advantages, privileges, and long-term rights
A company purchased a tract of land for its natural resources at a cost of $1,500,000. It expects to mine 2,000,000 tons of ore from this land. The salvage value of the land is expected to be $250,000. What is the depletion expense?
$0.625
The cost of land would not include:
A. Purchase price
B. Costs of removing existing structures
C. Cost of parking lot lighting
D. Fees for insuring the title
E. Government assessments
C. Cost of parking lot lighting
How do you calculate straight-line method, units-of-production method, and double-declining-balance method?
Straight-line method= (Cost - salvage value/ Useful life in periods)
Units-of -Production= (Cost- Salvage value/ Total units of production) x (Units in period)
Double-declining-balance method= (Cost - salvage value/ Useful life in periods) x 2 x beginning period book value
How do you compute depletion?
Depletion expense= (cost - salvage value / total units of capacity) x Units extracted and sold in period
What is a patent?
exclusive right given to the owner to produce and sell an item or process for 20 years.
Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. What would be the depreciation expense for the second year of its useful life using the double-declining-balance method?
$544
What are the three factors in computing depreciation? and explain each one.
Cost- all necessary and reasonable expenditures to acquire it and to prepare it for it's intended use.
Salvage Value- estimate of the assets value at the end of it's benefit period.
Useful life- Length of time it is used in a companies operations.