Exam 11: Depreciation and Depletion

On January 1, 2010, Richard Co.bought a machine for $10, 000.Residual value was estimated to be $400 and a five-year life was used for straight-line depreciation.On January 1, 2012, it was estimated that the total life from acquisition date should have been six years and residual value should have been estimated at $600. Required: Compute depreciation expense for 2012.

Depletion of a natural resource is typically recorded as a

When low-cost depreciable assets with similar characteristics, service lives, and residual values are acquired, which depreciation method should be used?

Many companies that use the declining-balance method of depreciation switch to the straight-line method at what point in the life of a depreciable asset?

The factors involved in computing periodic depreciation charges for an asset do not include the

The straight-line and accelerated depreciation methods differ significantly in the amount and timing of the depreciation expense recognized and reported each year. Required: Discuss the factors that should be considered when choosing between the straight-line and accelerated depreciation methods.

The Cardell Company purchased a machine on January 2, 2010, at a cost of $1, 200, 000.The machine had an estimated useful life of eight years and a residual value of $120, 000.Cardell computes depreciation by the sum-of-the-years'-digits method.What amount, net of accumulated depreciation, will appear on the company's December 31, 2012, balance sheet for this machine?

Which of the following depreciation methods should be used when the expected benefits to be received from an asset will decline each period?

Which one of the following statements is not a disclosure requirement for depreciation?

Which one of the following statements is true?

Which depreciation method cannot be used when the residual value is zero?

On January 1, 2010, Digger purchased some equipment for $19, 600.The anticipated life of the equipment was five years and residual value was estimated to be $3, 100.The machine was expected to produce 600, 000 units.In January of 2010, 25, 000 units were produced and production was doubled in February.The company uses the activity depreciation method.What is the amount of depreciation expense for the month of February?

On January 1, 2010, Tomas Company purchased machinery costing $3, 000, 000.The company uses straight-line depreciation and estimated the machinery's useful life to be 12 years and its residual value to be $600, 000. At the end of 2013, the company felt that technological advances had caused an impairment of its machinery and that its remaining useful life was only four years.The company estimates the machinery will generate cash inflows of $500, 000 and cash outflows of $100, 000 each of the next four years.The company uses a 15% rate of return to evaluate capital budgeting projects. Required: a. Determine if an imparment loss has occurred. (Show all calculations). b. Calcutate the amount of any impaiment loss to be recognized. The present value of an annuity is 2.85498 ; present value of $\$ 1$ is 0.57175 ; and future value of amuity is 4.99338 .

Five trucks costing $20, 000 each were purchased by the Burns Company at the beginning of 2010.Burns capitalized the trucks in a single asset account and depreciates them using the group method.Each truck was expected to have a residual value of $6, 000 in four years.At the end of 2013, Burns sold one truck for $8, 000.For what amount is accumulated depreciation debited in the journal entry to record the disposal of that truck?

Which depreciation method calculates annual depreciation expense based on the book value of an asset?

On January 1, 2010, Mills purchased a machine that had an estimated useful life of six years and $5, 000 residual value.The depreciation on this machine was $2, 700 in 2011 using the 150%-declining-balance depreciation method. Required: Compute the cost of this machine.

Which one of the following statements is not true?

The Rubio Company purchased a truck for $50, 000 on October 10, 2010.The truck has a salvage value of $5, 000 and an eight-year useful life.The company uses double-declining-balance 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 income tax savings from annual depreciation expense is calculated as

Karen Co.computes depreciation to the nearest whole month and uses the straight-line method.On April 2, 2010, the company purchased an asset for $14, 000 with a four-year life and a $2, 000 residual value.On November 6, Karen also sold an asset with a cost of $34, 500 that had been purchased in 2008.The sold asset had been estimated to have a five-year life and no residual value when it was purchased.The depreciation expense on these two assets for 2010 totals