Exam 11: Depreciation and Depletion

Madison Industries uses the straight-line depreciation method.One asset had been purchased for $9, 000.Annual depreciation expense was $800 after considering residual value of $1, 000.What was the approximate life of the asset?

On July 9, 2010, Marcus Company purchased an asset for $18, 000.Marcus estimated a four-year life and no salvage value.Marcus uses sum-of-the-years'-digits depreciation to the nearest whole month.Depreciation expense for 2013 will be

The MACRS differs from straight-line depreciation computed for financial reporting.In this respect, which of the following is not true?

When accounting for long-lived assets, companies may make modifications in the procedures related to specific assets.Companies may change depreciation methods or may change an estimate of the service life of the assets. Required: Describe how these two types of accounting changes are to be handled.

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

The service life of an asset may be measured by all of the following except

On January 1, 2010, Lefler, Inc.purchased a machine for $6, 000.The estimated life and residual value were five years and $150, respectively.The machine will produce approximately 80, 000 units over its life.In 2010 and 2011, the machine produced 10, 000 and 15, 000 units, respectively.In 2011, Lefler recorded $1, 440 of depreciation expense.The depreciation method in use was the

Once an asset is impaired,

Which one of the following statements on IFRS is not true?

A company purchased ten delivery vehicles at a cost of $20, 000 each and used the group depreciation method.Which of the following entries would be correct when recording the subsequent sale of an individual computer for $8, 500 (group accumulated depreciation is $88, 000)?

Worth Manufacturing Company purchased a new production machine on July 1, 2010, for $140, 000.The estimated salvage value is $10, 000.The company uses units-of-production depreciation and estimates the machine will produce 100, 000 units during its useful life.In 2010, the company manufactured 5, 000 units after acquiring the machine.Depreciation expense for 2010 will be

Battle Co.purchased a new truck for $36, 000 on June 1, 2010, with a useful life of eight years and a residual value of $4, 800.If the company used double-declining-balance depreciation computed to the nearest whole year, depreciation expense for 2011 was

Brady's purchased a piece of equipment for $30, 000 with a useful life of nine years and a residual value of $6, 000 on January 2, 2010.If Brady's used the sum-of-the-years'-digits method with the half-year convention, depreciation expense for 2010 was

Consider the following:

The Pecan Street Ice Cream Company discovers that depreciation expense was overstated last year.How should this discovery be reported in the current year?

Green Bay Mfg.Co.purchased equipment on January 1, 2010, at a cost of $800, 000.The equipment is expected to have a service life of ten years, or 40, 000 hours, and a residual value of $70, 000.During 2010, the equipment was operated for 5, 000 hours, and during 2011, it was operated for 7, 000 hours. Required: Determine the depreciation expense for this machine in 2010 and 2011 under each of the following depreciation methods: 2010 2011 a. Straight-line method b. Activity method (hours ran) c. Double declining balance method d. Sum-of the-yeares digits method

Which one of the following statements is true?

Information for heterogeneous assets A, B, and C of Health Clubs of America is provided below.The company uses composite depreciation for these assets. Estimated Residual Estimated Asset Cost Value Life A \ 100,000 \ 10,000 9 yerrs B 60,000 4,000 8 yers C 40,000 8,000 4 years Required: a. Calculate the composite depreciation rate. b. Journalize the sale of Asset C for $\$ 28,000$ after two full years of use

When conducting an impairment test, a company must estimate

On January 1, 2010, Broadway Co.had purchased a machine for $60, 000.This machine had an estimated service life of eight years and an estimated residual value of $4, 000.It has been depreciated by the straight-line method since acquisition.On January 1, 2013, it was determined that the remaining service life for this machine was nine years and that the residual value would be $3, 000. Required: Record the depreciation expense for 2013.