Exam 11: Depreciation, Impairments, and Depletion

Impaired assets held for disposal should be reported at the lower of cost or net realizable value.

On January 1, 2006, Carson Company purchased a new machine for $2,100,000.The new machine has an estimated useful life of nine years and the salvage value was estimated to be $75,000.Depreciation was computed on the sum-of-the-years'-digits method.What amount should be shown in Carson's balance sheet at December 31, 2007, net of accumulated depreciation, for this machine?

Which of the following principles best describes the conceptual rationale for the methods of matching depreciation expense with revenues?

The major difference between the service life of an asset and its physical life is that

If an industrial firm uses the units-of-production method for computing depreciation on its only plant asset, factory machinery, the credit to accumulated depreciation from period to period during the life of the firm will

Quayle Company acquired machinery on January 1, 2002 which it depreciated under the straight-line method with an estimated life of fifteen years and no salvage value.On January 1, 2007, Quayle estimated that the remaining life of this machinery was six years with no salvage value.How should this change be accounted for by Quayle?

Companies frequently use the composite approach when the assets are similar in nature and have approximately the same useful lives.

Rubber Soul Company reported the following data: 2007 2008 Sales \ 2,000,000 \ 2,600,000 Net Income 300,000 400,000 Assets at year end 1,800,000 2,500,000 Liabilities at year end 1,100,000 1,500,000 What is Rubber Soul's asset turnover for 2008?

Use the following information for questions For 2007, Colaw Company reports beginning of the year total assets of $900,000, end of the year total assets of $1,100,000, net sales of $1,250,000, and net income of $250,000. -The rate of return on assets for Colaw in 2007 is

On April 1, 2005, Reiley Co.purchased new machinery for $240,000.The machinery has an estimated useful life of five years, and depreciation is computed by the sum-of-the-years'-digits method.The accumulated depreciation on this machinery at March 31, 2007, should be

The major objection to the straight-line method is that it assumes the asset's economic usefulness and repair expense is the same each year.

A machine with a five-year estimated useful life and an estimated 10% salvage value was acquired on January 1, 2005.The depreciation expense for 2007 using the double-declining balance method would be original cost multiplied by

McCartney Company purchased a depreciable asset for $250,000 on April 1, 2005.The estimated salvage value is $25,000, and the estimated useful life is 5 years.The straight-line method is used for depreciation.What is the balance in accumulated depreciation on May 1, 2008 when the asset is sold?

The most common method of recording depletion for accounting purposes is the

The profit margin on sales ratio is a measure for analyzing the use of property, plant, and equipment.

During 2007, Geiger Co.sold equipment that had cost $98,000 for $58,800.This resulted in a gain of $4,300.The balance in Accumulated Depreciation-Equipment was $325,000 on January 1, 2007, and $310,000 on December 31.No other equipment was disposed of during 2007.Depreciation expense for 2007 was

During 2007, Bolton Corporation acquired a mineral mine for $1,500,000 of which $200,000 was ascribed to land value after the mineral has been removed.Geological surveys have indicated that 10 million units of the mineral could be extracted.During 2007, 1,500,000 units were extracted and 1,200,000 units were sold.What is the amount of depletion expensed for 2007?

The asset turnover ratio is computed by dividing net sales by ending total assets.

Roberts Truck Rental uses the group depreciation method for its fleet of trucks.When it retires one of its trucks and receives cash from a salvage company, the carrying value of property, plant, and equipment will be decreased by the

On January 1, 2000, Barnes Company purchased equipment at a cost of $50,000.The equipment was estimated to have a salvage value of $5,000 and it is being depreciated over eight years under the sum-of-the-years'-digits method.What should be the charge for depreciation of this equipment for the year ended December 31, 2007?