Exam 11: Depreciation, Impairments, and Depletion

Grover Corporation purchased a truck at the beginning of 2014 for $93,600. The truck is estimated to have a salvage value of $3,600 and a useful life of 120,000 miles. It was driven 21,000 miles in 2014 and 29,000 miles in 2015. What is the depreciation expense for 2014?

Angst Company purchased equipment in January of 2004 for $200,000. The equipment was being depreciated on the straight-line method over an estimated useful life of 20 years, with no salvage value. At the beginning of 2014, when the equipment had been in use for 10 years, the company paid $25,000 to overhaul the equipment. As a result of this improvement, the company estimated that the useful life of the equipment would be extended an additional 5 years. What should be the depreciation expense recorded for this equipment in 2014?

U.S. GAAP, per SFAS No. 153, now requires that gains on exchanges of nonmonetary assets be recognized if the exchange lacks commercial substance.

Economic factors that shorten the service life of an asset include

Dividends representing a return of capital to stockholders are not uncommon among companies which

Inadequacy is the replacement of one asset with another more efficient and economical asset.

The primary IFRS related to property, plant and equipment is found in

Which of the following is a realistic assumption of the straight-line method of depreciation?

Marsh Corporation purchased a machine on July 1, 2012, for $1,250,000. The machine was estimated to have a useful life of 10 years with an estimated salvage value of $70,000. During 2015, it became apparent that the machine would become uneconomical after December 31, 2019, and that the machine would have no scrap value. Accumulated depreciation on this machine as of December 31, 2014, was $295,000. What should be the charge for depreciation in 2015 under generally accepted accounting principles?

In March, 2014, Mallory Mines Co. purchased a coal mine for $8,000,000. Removable coal is estimated at 1,500,000 tons. Mallory is required to restore the land at an estimated cost of $960,000, and the land should have a value of $840,000. The company incurred $2,000,000 of development costs preparing the mine for production. During 2014, 450,000 tons were removed and 300,000 tons were sold. The total amount of depletion that Mallory should record for 2014 is

During 2014, Corporation acquired a mineral mine for $4,000,000 of which $400,000 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 2014, 1,800,000 units were extracted and 1,500,000 units were sold. What is the amount of depletion expensed for 2014?

On April 1, 2013, Verlin Co. purchased new machinery for $300,000. 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, 2015, should be

Impairment. Presented below is information related to equipment owned by Porto Company at December 31, 2014. Assume that Porto will continue to use this asset in the future. As of December 31, 2014, the equipment has a remaining useful life of 4 years. Instructions (a) For Porto company, the recoverability test compares $______ to $______. As a result, the asset ______ the recoverability test, because ______ is/are less than ______ so a ______ on impairment is recorded in 2014. (b) Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2014. (c) Prepare the journal entry to record depreciation expense for 2015. (d) The fair value of the equipment at December 31, 2015 is $4,100,000. Prepare the journal entry (if any) necessary to record this increase in fair value.

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

Slotkin Products purchased a machine for $39,000 on July 1, 2014. The company intends to depreciate it over 8 years using the double-declining balance method. Salvage value is $3,000. Depreciation for 2015 to the closest dollar is

For the composite method, the composite