Exam 17: Depreciation

Martha Run buys a new duplicating machine for $20,000 with a residual value of $2,000. Its estimated life is five years. Calculate the book value at the end of year 1, assuming twice the straight-line rate.

All assets that last longer than one year will be depreciated.

MACRS is not used for tax purposes.

A company using the straight-line method over 10 years would be depreciating its asset at a 10% rate each year.

Apple Co. bought a car with an estimated life of five years for $12,000. The residual value of the car is $2,000. What will be the amount of depreciation expense each year using the straight-line method? If the car was bought on April 3, what would be the depreciation for the first year?

Depreciation is an exact science that requires no estimation.

For partial-years depreciation, if an asset is purchased on February 8, how many months' depreciation will be taken for the year?

A depreciation schedule for partial years must cover at least three years.

Young Corporation bought a car with an estimated life of five years for $25,000. The residual value of the car is $5,000. After three years, the car was sold for $11,000. What was the difference between book value and selling price if Young used the straight-line method of depreciation?

What is the depreciation expense for the second year (straight-line method) using the following?

Which method does not deduct residual value in calculating depreciation expense?

A truck costs $16,000 with a residual value of $1,000. It has an estimated useful life of five years. If the truck was bought on July 3, what would be the book value at the end of year 1 using straight-line rate?

MACRS does not use residual value; thus, assets are depreciated to zero.

ACRS came before MACRS.

In a straight-line depreciation schedule, the depreciation expense is the same each year.

A truck costs $35,000 with a residual value of $2,000. Its service life is five years. Using the declining-balance method at twice the straight-line rate, the book value at the end of year 2 is:

The units-of-production method is based on the passage of time.

Book value is cost plus accumulated depreciation.

Using the declining-balance method, complete the table as shown (twice the straight-line rate): Auto: $26,000 Estimated life: 10 years Residual value: $600

Book value is: