Exam 11: Depreciation and Depletion

Exhibit 11-1 On January 1, 2010, Hills purchased equipment for $200, 000.The equipment had an estimated useful life of ten years and an estimated residual value of $40, 000.Use the double-declining-balance method to answer the following question(s). - Refer to Exhibit 11-1.What is the net book value of this asset that Hills should report on the company's balance sheet at December 31, 2011?

Which one of the following disclosures is required by generally accepted accounting principles?

The FASB established principles for evaluating asset impairment because it hoped financial reporting would

Panhandle Utilities bought 1, 000 poles on January 1, 2010, at a cost of $195, 000 and a residual value of $15, 000.In 2010, 10 of the poles were destroyed in a train accident.In 2011, 50 of the poles were sold at a price of $60 each.The replacement cost per pole at the end of 2010 was $195, but the replacement cost had risen to $204 by the end of 2011. Required: Calculate the depreciation expense for 2010 and 2011 using the inventory system.

On January 1, 2010, Farmer Inc.purchased five machines at a cost of $14, 000 each.The company adopted the group (straight-line)depreciation method, using an eight-year life with a $2, 800 salvage value per machine.Correct depreciation was recorded in 2010 and 2011.On January 1, 2012, one of the machines was sold for $6, 500.On January 3, 2012, a new unrelated piece of equipment was purchased for $15, 000 with no salvage value and a six-year life.It will be depreciated using the straight-line method. Required: Prepare appropriate journal entries for a. $\text { January 1, } 2012$ b. $\text { December } 31,2012 \text { to record depreciation expense }$

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?

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

On April 20, 2010, Moss Co.purchased an asset costing $66, 000 with a useful life of nine years and a residual value of $6, 000.The company uses sum-of-the-years'-digits depreciation. Required: Compute depreciation expense for 2010 using the a. nearest whole month method b. nearest whole year method c. half-year convention method

The Zorro Company purchased equipment on January 1, 2010, for $100, 000.The equipment had an estimated residual value of $10, 000, an estimated useful life of five years, and estimated lifetime output of 18, 000 units.In 2011, the company produced 4, 400 units and recorded depreciation expense of $22, 000.What depreciation method did the company use?

Depreciation expense under the inventory system is

Metzger, Inc.purchased ten portable heating units for $5, 000 each, with an average expected service life of four years and a residual value of $700 each.The depreciation rate for the assets, assuming the group depreciation method is used, will be

Depreciation of an asset based on the number of hours of usage is a(n)

Priscilla Company purchased a machine on January 1, 2010, for $90, 000 with a $24, 000 salvage value and a nine-year useful life.The company uses double-declining-balance depreciation. Required: Compute the depreciation expense (to the nearest whole dollar)for 2010 and 2011.

What effect does depreciation have on the calculation of the rate of return on total assets?

Related to accounting for the impact of inflation on fixed assets, GAAP requires

On July 1, 2010, United Stereo purchased camera equipment for $5, 000.The estimated life of the equipment was ten years and the residual value was estimated to be $2, 000.Double-declining-balance depreciation was used.If calculations are based on the nearest whole month, depreciation expense for the year 2012 was

On January 1, 2010, Paradise Resorts purchased a machine.Residual value was estimated to be $16, 000 after a 20-year life.Using sum-of-the-years'-digits depreciation, the company recorded $10, 500 depreciation expense in 2012. Required: Compute the cost of the machine.

Which of the following is true regarding IFRS versus U.S.GAAP depreciation requirements?

Tangible assets that are attached to natural resources are depreciated over

It has been suggested that repair and maintenance costs should be considered when selecting a depreciation method. Required: Discuss the reasoning behind this assertion and explain how it would be implemented.