D. PROPERTY, PLANT, AND EQUIPMENT 02

Question 1

_{D. PROPERTY, PLANT, AND EQUIPMENT}

Depreciation Methods (2)

Answer 1

Non-accelerated methods

Accelerated methods:

Question 2

_{D. PROPERTY, PLANT, AND EQUIPMENT}

Depreciation Methods #1

Non-accelerated methods (3)

Answer 2

Non-accelerated methods

• Straight line: (cost - salvage value) / number of years
• Service hours method: (cost - salvage / total service hours) x hours used
• Units of output: (cost - salvage/total units) x units produced

Question 3

_{D. PROPERTY, PLANT, AND EQUIPMENT}

Depreciation Methods #2

Accelerated methods: (2)

Answer 3

Accelerated methods:

• Sum of years digits: (# years remaining x (cost - salvage)) / sum of the years
• Double declining: 2x straight line rate x (cost - acc depreciation)

Question 4

_{D. PROPERTY, PLANT, AND EQUIPMENT}

Natural resources

Answer 4

Natural resources

Acquisition costs are costs to acquire natural resources such as land or a cost to lease a property.

Exploration costs are costs to locate the natural resources.

Successful efforts: only costs of successful exploration are capitalized, unsuccessful are expensed.

Full cost: all exploration costs are capitalized.

Question 5

_{D. PROPERTY, PLANT, AND EQUIPMENT}

Depletion of Natural Resources

Answer 5

Depletion is:

• the allocation of the natural resource to inventory
• debited to inventory and credited to a contra account for the natural resource asset.