Question 1

A loss on the sale of a plant asset is recorded when the sales price exceeds the book value.

Accepted Answer

A loss on the sale of a plant asset is recorded when the sales price is less than the book value, not when it exceeds the book value. If the sales price exceeds the book value, then a gain on the sale of the asset is recorded.

Question 2

Which of the following items is included in the journal entry if a company sells equipment at a price equal to its book value?

Accepted Answer

When equipment is sold at its book value, the original cost of the equipment is credited to remove it from the books.

Question 3

If assets are junked before being fully depreciated,there is a loss equal to the book value of the asset.

Accepted Answer

When assets are junked before being fully depreciated, the book value of the asset is the amount that has not yet been depreciated. Therefore, if the asset is junked, there will be a loss equal to the book value of the asset.

Question 4

A gain on disposal of an asset is recorded when cash received is less than book value.

Accepted Answer

A gain on disposal of an asset is recorded when cash received is greater than book value, not less than book value.

Question 5

A loss occurs on the exchange of a plant asset if the market value of the new asset received is greater than the total amount given up in the exchange.

Accepted Answer

A loss occurs on the exchange of a plant asset if the market value of the new asset received is less than the total amount given up in the exchange. In other words, if the amount given up is greater than the market value of the new asset received, a loss occurs.

Question 6

An asset was purchased for $12,000.The asset's estimated useful life was 5 years,and its residual value was $2,000.Straight-line depreciation was used.
-How much gain or loss is reported if the asset is sold for $400 at the end of the fifth year?

Accepted Answer

D) Calculations: $2,000 - $400 = $1,600

Question 7

Pallmall Company has a truck which was purchased in prior years for $60,000.At the end of 2013,there is $30,000 of accumulated depreciation.The value of the truck has been impaired,and its remaining value is now estimated at $18,000.Please provide the journal entry needed to record the asset impairment.
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Accepted Answer

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Question 8

A plant asset is sold for $1,000.The original cost was $9,000,salvage value was estimated at $200,and useful life was estimated at 12 years.At time of sale,accumulated depreciation was $8,500.The sale resulted in a gain of $500.

Accepted Answer

Calculations: $1,000 - ($9,000 - $8,500) = $500

Question 9

When a plant asset is sold,the first step is to bring the depreciation up to date.

Accepted Answer

This is because the depreciation recorded on the plant asset up until the point of sale needs to be removed in the accounting records. This ensures that the carrying value of the asset is accurate and reflects the amount for which it can be sold.

Question 10

An asset was purchased for $12,000.The asset's estimated useful life was 5 years,and its residual value was $2,000.Straight-line depreciation was used.
-How much gain or loss is reported if the asset is sold for $3,000 at the end of the fifth year?

Accepted Answer

A) Calculations: $3,000 - $2,000 = $1,000

Question 11

An asset was purchased for $12,000.The asset's estimated useful life was 5 years,and its residual value was $2,000.Straight-line depreciation was used.
-How much gain or loss is reported if the asset is sold for $9,000 at the end of the second year?

Accepted Answer

A) Calculations: $12,000 - [($12,000-$2,000)/5] × 2 = $8,000
$9,000 - $8,000 = $1,000

Question 12

An asset was purchased for $12,000.The asset's estimated useful life was 5 years,and its residual value was $2,000.Straight-line depreciation was used.
-How much gain or loss is reported if the asset is sold for $9,000 at the end of the first year?

Accepted Answer

D) Calculations: $12,000 - [($12,000-$2,000)/5] × 1 = $10,000
$10,000 - $9,000 = $1,000

Question 13

An asset was purchased for $12,000.The asset's estimated useful life was 5 years,and its residual value was $2,000.Straight-line depreciation was used.
-How much gain or loss is reported if the asset is sold for $4,500 at the end of the third year?

Accepted Answer

D) Calculations: $12,000 - [($12,000-$2,000)/5] × 3 = $6,000
$6,000 - $4,500 = $1,500

Question 14

A plant asset is sold for $1,000.The original cost was $9,000,salvage value was estimated at $200,and useful life was estimated at 12 years.At time of sale,accumulated depreciation was $8,500.The sale resulted in a loss of $500.

Accepted Answer

Calculations: $1,000 - ($9,000 - $8,500) = $500

Question 15

A loss on disposal of an asset is recorded when cash received is less than book value.

Accepted Answer

A loss on disposal of an asset is recorded when the cash received from selling an asset is less than its book value. This is because the book value represents the remaining amount of the asset's original cost that has not yet been depreciated, and selling the asset for less than this amount results in a loss.

Question 16

When a plant asset is sold,if the book value is higher than the sales price,there will be a loss on sale.

Accepted Answer

If the book value (original cost less accumulated depreciation) of a plant asset is higher than the sales price, the difference represents a loss on sale.

Question 17

An asset was purchased for $12,000.The asset's estimated useful life was 5 years,and its residual value was $2,000.Straight-line depreciation was used.
-How much gain or loss is reported if the asset is sold for $4,500 at the end of the fourth year?

Accepted Answer

B) Calculations: $12,000 - [($12,000-$2,000)/5] × 4 = $4,000
$4,500 - $4,000 = $500

Question 18

When a plant asset is sold,if the book value is lower than the sales price,there will be a loss on sale.

Accepted Answer

If the book value is lower than the sales price, there will be a gain on sale. A loss on sale occurs when the book value is higher than the sales price.

Question 19

If the sales price of a plant asset is lower than the book value,there will be a loss on sale.

Accepted Answer

If the sales price is lower than the book value, it means that the asset is being sold for less than what it is worth according to the company's accounting records. This creates a loss on sale, which is calculated as the difference between the book value and the sales price. The loss is recorded on the income statement as an expense, which reduces the company's net income for the period.

Question 20

A company purchased equipment for $100,000 in 2012.The machine will be used for 10,000 hours and will have a residual value of $20,000.The equipment was used for 2,400 hours in 2012.How much depreciation will be recorded in 2012 if the company elects the units-of-production method?

Accepted Answer

A) Calculations: [($100,000 - $20,000)/10,000] × 2,400 = $19,200

Quiz 9: Plant Assets and Intangibles

A loss on the sale of a plant asset is recorded when the sales price exceeds the book value.

Which of the following items is included in the journal entry if a company sells equipment at a price equal to its book value?

If assets are junked before being fully depreciated,there is a loss equal to the book value of the asset.

A gain on disposal of an asset is recorded when cash received is less than book value.

A loss occurs on the exchange of a plant asset if the market value of the new asset received is greater than the total amount given up in the exchange.

An asset was purchased for $12,000.The asset's estimated useful life was 5 years,and its residual value was $2,000.Straight-line depreciation was used. -How much gain or loss is reported if the asset is sold for $400 at the end of the fifth year?

A plant asset is sold for $1,000.The original cost was $9,000,salvage value was estimated at $200,and useful life was estimated at 12 years.At time of sale,accumulated depreciation was $8,500.The sale resulted in a gain of $500.

When a plant asset is sold,the first step is to bring the depreciation up to date.

An asset was purchased for $12,000.The asset's estimated useful life was 5 years,and its residual value was $2,000.Straight-line depreciation was used. -How much gain or loss is reported if the asset is sold for $3,000 at the end of the fifth year?

An asset was purchased for $12,000.The asset's estimated useful life was 5 years,and its residual value was $2,000.Straight-line depreciation was used. -How much gain or loss is reported if the asset is sold for $9,000 at the end of the second year?

An asset was purchased for $12,000.The asset's estimated useful life was 5 years,and its residual value was $2,000.Straight-line depreciation was used. -How much gain or loss is reported if the asset is sold for $9,000 at the end of the first year?

An asset was purchased for $12,000.The asset's estimated useful life was 5 years,and its residual value was $2,000.Straight-line depreciation was used. -How much gain or loss is reported if the asset is sold for $4,500 at the end of the third year?