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Chapter 10: Q1Q (page 530)

Question: What are the major characteristics of plant assets?

Short Answer

Expert verified


Answer

  1. Only use in operation and not use for resale.
  2. Purchased for long term use
  3. Tangible in nature

Step by step solution

01

Plant assets only used in normal operation

Plant assets are purchased for the purpose of use in the normal operations of the business. These assets do not resell. Assets which are not used in the normal operations of business are not consider as plant assets

02

Plant assets used for long term

Plant assets are the assets which are used for more than one year. Depreciation on annual basis charged on the plant assets. Depreciation is charged on all plant assets except land.

03

Plant assets have physical substance

Plant assets have tangible in nature. Tangible assets are the assets which can be seen or touched.

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Most popular questions from this chapter

Question: How should the amount of interest capitalized be disclosed in the notes to the financial statements? How should interest revenue from temporarily invested excess funds borrowed to finance the construction of assets be accounted for?

Slaton Corporation traded a used truck for a new truck. The used truck cost \(20,000 and has accumulated depreciation of \)17,000. The new truck is worth \(35,000. Slaton also made a cash payment of \)33,000. Prepare Slaton’s entry to record the exchange. (The exchange has commercial substance.)

Question: Schwartzkopf Co. purchased for \(2,200,000 property that included both land and a building to be used in operations. The seller’s book value was \)300,000 for the land and \(900,000 for the building. By appraisal, the fair value was estimated to be \)500,000 for the land and $2,000,000 for the building. At what amount should Schwartzkopf report the land and the building at the end of the year?.

Question: (Nonmonetary Exchanges) During the current year, Marshall Construction trades an old crane with a book value of \(90,000 (original cost \)140,000 less accumulated depreciation of \(50,000) for a new crane from Brigham Manufacturing Co. The new crane cost Brigham \)165,000 to manufacture and is classified as inventory. The following information is also available.

Marshall Const.

Brigham Mfg. Co.

Fair value of old crane

\( 82,000

Fair value of new crane

\)200,000

Cash paid

118,000

Cash received

118,000

Instructions

  1. Assuming that this exchange is considered to have commercial substance, prepare the journal entries on the books of
    1. Marshall Construction and
    2. Brigham Manufacturing.
  2. Assuming that this exchange lacks commercial substance for Marshall, prepare the journal entries on the books of Marshall Construction.
  3. Assuming the same facts as those in (a), except that the fair value of the old crane is \(98,000 and the cash paid is \)102,000, prepare the journal entries on the books of
    1. Marshall Construction and
    2. Brigham Manufacturing.
  4. Assuming the same facts as those in (b), except that the fair value of the old crane is \(97,000 and the cash paid \)103,000, prepare the journal entries on the books of
    1. Marshall Construction and
    2. Brigham Manufacturing.

Cheng Company traded a used truck for a new truck. The used truck cost \(30,000 and has accumulated depreciation of \)27,000. The new truck is worth \(37,000. Cheng also made a cash payment of \)36,000. Prepare Cheng’s entry to record the exchange. (The exchange lacks commercial substance.)
See all solutions

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