5. A manufacturing firm purchased used equipment for $135,000. The
original owners estimated that the residual value of the equipment
was $10,000. The carrying amount of the equipment was $120,000
when ownership transferred. The new owners estimate that the
expected remaining useful life of the equipment was 10 years, with a
salvage value of $15,000. What amount represents the depreciable
base used by the new owners?
6. After an impairment loss is recognized, the adjusted carrying
amount of the intangible asset shall be its new accounting basis.
Which of the following statements about subsequent reversal of a
previously recognized impairment loss is correct?
7. Northstar Co. acquired a registered trademark for $600,000. The
trademark has a remaining legal life of five years, but can be renewed
every 10 years for a nominal fee. Northstar expects to renew the
trademark indefinitely. What amount of amortization expense should
Northstar record for the trademark in the current year?
8. Hull Co. bought a trademark from Roe Corp. on January 1, 2005,
for $224,000.
9. A firm began a mineral exploitation venture during the current year
by spending (1) $40 million for the mineral rights; (2) $100 million
exploring for the minerals, one-fourth of which were successful; and
(3) $60 million to develop the site. Management estimated that 20
million tons of ore would ultimately be removed from the property.
Wages and other extraction costs for the current year amounted to $10
million. In total, 2 million tons of ore were removed from the deposit
in the current year. The entire production for the period was sold.
Compute cost of goods sold under the successful efforts method.
10. Spiro Corp. uses the sum-of-the-years' digits method to depreciate
equipment purchased in January 2003 for $20,000. The estimated
salvage value of the equipment is $2,000, and the estimated useful life