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Chapter 8: Q17DQ (page 386)

Question: On its recent balance sheet in Appendix A, Apple lists its plant assets as “Property, plant and equipment, net.” What does “net” mean in this title?

Short Answer

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Step by step solution

01

Plant assets

Property, plant, and equipment assets are also known as plant assets. Plant assets are resources that have physical substance and are used in the operations of a business. These are not intended for sale to the customer. They are expected to be used by the company for several years.

02

Property, plant and equipment, net

Net property, plant, and equipment is the difference between gross property, plant, and equipment and accumulated depreciation.

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Most popular questions from this chapter

Question: Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of \(43,500. The machine’s useful life is estimated at 10 years, or 385,000 units of product, with a \)5,000 salvage value. During its second year, the machine produces 32,500 units of product. Determine the machine’s second-year depreciation using the double-declining-balance method.

Gilly Construction trades in an old tractor for a new tractor, receiving a \(29,000 trade-in allowance and paying the remaining \)83,000 in cash. The old tractor had cost \(96,000, and straight-line accumulated depreciation of \)52,500 had been recorded to date under the assumption that it would last eight years and have a $12,000 salvage value. Answer the following questions assuming the exchange has commercial substance.

  1. What is the book value of the old tractor at the time of exchange?
  2. What is the loss on this asset exchange?
  3. What amount should be recorded (debited) in the asset account for the new tractor?

Question: 1. Classify the following as either a revenue expenditure (RE) or a capital expenditure (CE).

  1. Paid \(40,000 cash to replace a compressor on a refrigeration system that extends its useful life by four years.

  2. Paid \)200 cash per truck for the cost of their annual tune-ups.

  3. Paid \(175 for the monthly cost of replacement filters on an air-conditioning system.

  4. Completed an addition to an office building for \)225,000 cash.

2. Prepare the journal entries to record transactions a and d of part 1

Question: What characteristics of a plant asset make it different from other assets?

Identify the main difference between (a) plant assets and current assets, (b) plant assets and inventory, and (c) plant assets and long-term investments.
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