Depreciation

1. If a company purchases 5,000 No. 2 lead pencils for $800 and plans to use the pencils for five years, are the pencils a plant asset? Why?

2. Describe how the cost of a multiple asset purchase is allocated to the individual assets in the purchase.

3. What is depreciation?

1. When assets are exchanged, how do you determine the gain or loss?

2. How is the value of an asset received in an exchange determined?

3. Under what circumstances are gains and losses not recognized in a noncash exchange?

1. When gains and losses are not recognized in a noncash exchange, how is the cost of the new asset determined?

2. When is a loss on impairment recognized? (see, Of Interest)

3. What is a natural resource? What is depletion?

Solution:

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