Intangibles REVIEW Plant Assets and Quick Check (Answers are given on page 427.) 1. Bentley, Inc., purchased a tract of land, a small office building, and some equ 1,800,000. The appraised value of the land was $1,144,000, the building $ the equipment $396,000. What is the cost of the land? a. $936,000 b. $600,000 and c. $1,144,000 d. None of the above 2. Which statement is false? cost of the asset against the revenue generated over the asset's useful life. b. Depreciation is a process of allocating the cost of a plant asset over its useful life. a. Depreciation is based on the expense recognition principle because it apportions the Depreciation creates a fund to replace the asset at the end of its useful life. Use the following data for questions 3-6. On October 1, 2014, Freedom Communications purchased a new piece of equipment that e. The cost of a plant asset minus accumulated depreciation equals the asset's book value. cost $35,000. The estimated useful life is five years and estimated residual value is $8,000 3. What is the depreciation expense for 2014 if Freedom uses the straight-line method a. $5,400 b. $1,350 c. $1,750 d. $7,000 4. Assume Freedom Communications purchased the equipment on January 1, 2014. If Freedom uses the straight-line method for depreciation, what is the asset's book value at the end of 2015 a. $16,200 b. $21,000 c. $24,200 d. $32,200 5. Assume Freedom Communications purchased the equipment on January 1,2014. If Free- dom uses the double-declining-balance method, what is depreciation for 2015? a. $14,000 b. $8,400 c. $22,400 d. $6,480 6. Return to Freedom's original purchase date of October 1, 2014. Assume that Freedom use the straight-line method of depreciation and sells the equipment for $22,400 on October 2018. The result of the sale of the equipment is a gain (loss) of a. $9,000. b. $1,000. c. ($4,600) d. $0 bought a new machine for $23,000 on January 1. The machineixetd to last four years and to have a residual value of $3,000. If the company uses t declining-balance method, accumulated depreciation at the end of year 2 will be a. $23,000. b. $20,000. le- c. $15,000. d. $17,250 s. Which of the following is not a capital expenditure? a. A complete overhaul of an air-conditioning system b. Replacement of an old motor with a new one in a piece of equipment c. The cost of installing a piece of equipment d. A tune-up of a company vehicle e. The addition of a building wing