ACCT 3367 Gleim Review 2
Property, Plant, and Equipment
Depreciation, Impairments, and Depletion
[Fact Pattern #1]
Nella Corporation, which computes depreciation to the nearest whole month, placed
a new piece of equipment in operation on July 1, Year 1. It was expected to produce
400,000 units of product in its estimated useful life of 8 years. Total cost was
$300,000; salvage value was estimated to be $30,000. Nella employs a calendar
year for financial reporting purposes. Actual production for the past 3 years was as
Year 1 -- 34,000 units
Year 2 -- 62,500 units
Year 3 -- 58,400 units
(Refers to Fact Pattern #1)
If Nella uses the double-declining-balance method of depreciation, the amount
of depreciation computed (rounded to the nearest dollar) for this equipment for
financial reporting purposes in Year 3 would be
In January Year 1, Huff Mining Corporation purchased a mineral mine for $3.6
million with removable ore estimated by geological surveys at 2,160,000 tons.
The property has an estimated value of $360,000 after the ore has been
extracted. Huff incurred $1,080,000 of development costs preparing the
property for the extraction of ore. During Year 3, 270,000 tons was removed
and 240,000 tons was sold. For the year ended December 31, Year 3, Huff
should include what amount of depletion in its cost of goods sold?
Under what conditions may goodwill be recorded?
B. When net assets are amortized to a point below 33-1/3% of the fair value of
C. When a business is acquired.
D. When a formal appraisal is made.