Exam 11: Depreciation, Impairments, and Depletion

On January 1, 2008, Forrest Company purchased equipment at a cost of $130,000. The equipment was estimated to have a salvage value of $4,000 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, 2015?

Use of the double-declining balance method

Composite or group depreciation is a depreciation system whereby

As with U.S. GAAP, IFRS requires that both direct and indirect costs in self-constructed assets be capitalized.

Use the following information to answer questions 92 and 93. Exiter Inc. owns the following assets: -What is the composite life of Exiter's assets?

Sifton Company reported the following data: What is Sifton's asset turnover for 2015?

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

Net income is understated if, in the first year, estimated salvage value is excluded from the depreciation computation when using the

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

Falcon Company purchased a depreciable asset for $125,000. The estimated salvage value is $10,000, and the estimated useful life is 10 years. The straight-line method will be used for depreciation. What is the depreciation base of this asset?

Unlike U.S. GAAP, interest costs incurred during construction are not capitalized under IFRS.

Questions 7 through 10 are based on the following information: Tongas Company applies revaluation accounting to plant assets with a carrying value of $1,600,000, a useful life of 4 years, and no salvage value. Depreciation is calculated on the straight-line basis. At the end of year 1, independent appraisers determine that the asset has a fair value of $1,500,000. -The entry to record depreciation for this same asset in year two will include a

On July 1, 2014, Nowton Co. purchased machinery for $168,000. Salvage value was estimated to be $7,000. The machinery will be depreciated over ten years using the double-declining balance method. If depreciation is computed on the basis of the nearest full month, Nowton should record depreciation expense for 2015 on this machinery of

IFRS permits companies to carry assets at historical cost or use a revaluation model for fixed assets. According to IAS 16, if revaluation is used:1. it must be applied to all assets in a class of assets.2. assets must be revalued on an annual basis.3. assets must be depreciated on the straight-line basis.4. salvage values must be zero.

Regis Inc. bought a machine on January 1, 2004 for $400,000. The machine had an expected life of 20 years and was expected to have a salvage value of $40,000. On July 1, 2014, the company reviewed the potential of the machine and determined that its undiscounted future net cash flows totaled $200,000 and its discounted future net cash flows totaled $140,000. If no active market exists for the machine and the company does not plan to dispose of it, what should Regis record as an impairment loss on July 1, 2014?

On January 3, 2013, Salazar Co. purchased machinery. The machinery has an estimated useful life of eight years and an estimated salvage value of $60,000. The depreciation applicable to this machinery was $130,000 for 2015, computed by the sum-of-the-years'-digits method. The acquisition cost of the machinery was

Ramos Co. purchased machinery that was installed and ready for use on January 3, 2014, at a total cost of $115,000. Salvage value was estimated at $15,000. The machinery will be depreciated over five years using the double-declining balance method. For the year 2015, Ramos should record depreciation expense on this machinery of

If Labor, Inc. uses the composite method and its composite rate is 7.5% per year, what entry should it make when plant assets that originally cost $80,000 and have been used for 10 years are sold for $24,000?

Carson Company purchased a depreciable asset for $280,000. The estimated salvage value is $14,000, and the estimated useful life is 10,000 hours. Carson used the asset for 1,500 hours in the current year. The activity method will be used for depreciation. What is the depreciation expense on this asset?

If income tax effects are ignored, accelerated depreciation methods