Page 473 - Accounting Principles (A Business Perspective)

11. Plant asset disposals, natural resources, and intangible assets

Multiple-choice
Select the best answer for each of the following questions.
When a fully depreciated asset is still in use:

a. Prior years' depreciation should be adjusted.
b. The cost should be adjusted to market value.
c. Part of the depreciation should be reversed.
d. The cost and accumulated depreciation should remain in the ledger and no more depreciation should be
taken.
e. It should be written off the books.
A truck costing USD 45,000 and having an estimated salvage value of USD 4,500 and an original life of five

years is exchanged for a new truck. The cash price of the new truck is USD 57,000, and a trade-in allowance of USD
22,500 is received. The old truck has been depreciated for three years using the straight-line method. The new truck
would be recorded at:
a. USD 55,200.
b. USD 57,000.
c. USD 34,500.
d. USD 43,200.
e. None of the above.
Land containing a mine having an estimated 1,000,000 tons of economically extractable ore is purchased for

USD 375,000. After the ore deposit is removed, the land will be worth USD 75,000. If 100,000 tons of ore are
mined and sold during the first year, the depletion cost charged to expense for the year is:
a. USD 300,000.
b. USD 37,500.
c. USD 30,000.
d. USD 375,000.
e. None of the above.

Bren Company purchased a patent for USD 36,000. The patent is expected to have a finite life of 10 years even
though its legal life is 17 years. The amortization for the first year is:
a. USD 36,000.
b. USD 3,600.
c. USD 2,118.
d. USD 3,240.
e. None of the above.
Now turn to “Answers to self-test” at the end of the chapter to check your answers.

Questions

➢ When depreciable plant assets are sold for cash, how is the gain or loss measured?
➢ A plant asset that cost USD 27,000 and has a related accumulated depreciation account balance of
USD 27,000 is still being used in business operations. Would it be appropriate to continue recording

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