FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 11: Depreciation, Depletion, Impairment, and Disposal

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 71

Multiple Choice

Review LaterAdd Note

Review Later

On January 1, 2015, Danville Corporation acquired a machine at a cost of $60,000. The machine's service life was estimated to be ten years and its residual value to be $6,000. The straight-line method was used for depreciation. On January 1, 2020, the machine was no longer useful and was sold for $3,000. For 2020, in regard to this machine, how much of a loss should Danville record?

A) $27,000
B) $30,000
C) $3,000
D) $60,000

E) A) and B)
F) B) and D)

Correct Answer

verified

Show Answer

Question 72

Multiple Choice

Review LaterAdd Note

Review Later

The Chuck Company purchased a truck on January 1, 2016. The truck cost $106,000 and was expected to have a residual value of $14,000 at the end of 2018. Chuck uses the 150%-declining-balance depreciation method. What amount of depreciation should Chuck record on the truck in 2016?

A) $53,000
B) $30,667
C) $35,333
D) $46,000

E) B) and C)
F) C) and D)

Correct Answer

verified

Show Answer

Question 73

Multiple Choice

Review LaterAdd Note

On January 1, 2016, Mullhausen Co. began using the composite depreciation method. There were three machines to consider, as follows: At the end of the second year, Machine B was sold for $8,200. In the entry to record the sale, there should be a

Which depreciation method ignores residual value when computing the depreciable base of an asset?

On January 1, 2016, the Mills Car Repair Company acquired equipment at a cost of $55,000. At that time, the equipment was estimated to have a residual value of $5,000 at the end of an estimated five-year service life. During 2016 and 2017, the company recorded straight-line depreciation on the equipment. Required: Prepare all the journal entries for 2018 relating to the equipment for each of the following independent situations ignoring income taxes): a. Assume that the company switched to sum-of-the-years'-digits depreciation at the beginning of 2018 with a new estimated remaining life of four years. b. Assume, instead, that at the beginning of 2018, the equipment is determined to have a five- year remaining service life. Straight-line depreciation will still be used. c. Assume, instead, that at the beginning of 2018 the company discovered that it had erroneously ignored the estimated residual value in the computation of its depreciation for 2016 and 2017.

Exhibit 11-03 On January 1, 2016, Wheeler, Inc. purchased some equipment for $3,900. The equipment had an estimated life of five years and an expected residual value of $200. On July, 1, 2018, the equipment was sold for $1,000. Wheeler uses straight-line depreciation. -Refer to Exhibit 11-03, what was the amount of the loss or gain recognized in the sale?

In 2016, Western Maryland Company paid $3,000,000 for a mining tract with reserves of 100,000 tons of ore, which the company planned to mine over a 20-year period. The company spent $500,000 developing the mine. Western plans to spend $200,000 for reclamation when mining has been completed, after which the land will have an estimated value of $600,000. In 2016, Western mined and sold 8,000 tons of ore. What depletion should Western record for the year?

A requirement of GAAP is that companies should review their assets to ensure they are not impaired, especially when a change dictates the book value may not be recoverable.

Exhibit 11-1 On January 1, Year 1, Hills purchased equipment for $350,000. The equipment had an estimated useful life of ten years and an estimated residual value of $50,000. Use the double-declining-balance method to answer the following questions) . -Refer to Exhibit 11-1. How much depreciation should Hills record on the asset in year 1?

Mark Industries uses the straight-line depreciation method. One asset had been purchased for $11,000. Annual depreciation expense was $2,000 after considering residual value of $1,000. What was the estimated useful life of the asset?

Exhibit 11-2 Browning purchased a business copier for $4,500 on August 3, 2016. It has an estimated residual value of $500 and an expected service life of five years. Browning uses double-declining-balance depreciation computed to the nearest whole month. -Refer to Exhibit 11-2. Depreciation expense for 2016 was

Redeau Company has been depreciating certain assets using the straight-line method. At the beginning of the current year, the company changed to the sum-of-the-years'-digits method to depreciate these assets. Which of the following statements regarding this change is true?

Exhibit 11-05 Wilson is preparing his tax returns using the MACRS convention. The following information relates to the purchase of an asset on January 1, Year 1. MACRS Depreciation as a Percentage of the Cost of the Asset -Refer to Exhibit 11-05, what amount of depreciation would be recorded on the income tax returns for year 5?

How can service life be measured?

What determines residual value?

Hill has a fiscal year-end of December 31. In February, Hill purchased a piece of equipment for $12,000 with a four- year useful life and a zero residual value. Hill used the equipment to produce finished goods in March that were sold on credit in April with cash collected in May. Hill uses straight-line depreciation. The amount of depreciation expense affecting the reported income on the first quarter income statement was