Exam 11: Depreciation, Depletion, Impairment, and Disposal

The purpose of depreciation is to allocate the asset's cost systematically and rationally over the life of the asset to ensure that the company has adequate capital for future replacement.

The impairment loss for an asset that a company intends to hold and use is the difference between the

Consider the following: a. Peters Co. bought a machine for $15,790 on July 1, 2015. The estimated life of the machine was seven years, and salvage value was estimated to be $782. The straight-line depreciation method was used. Compute depreciation expense for 2015. b. Peters Co. bought a machine costing $30,492 on January 1, 2016. A six-year life was estimated with no salvage value. The sum-of-the-years'-digits depreciation method was used. Compute depreciation expense for 2020. c. Peters Co. bought a machine costing $62,000 on January 1, 2016. Salvage value was estimated to be $2,000, a five-year life was determined, and 150%-declining-balance depreciation was used. Compute the amount that would be in the accumulated depreciation account on December 31, 2017.

Which of the following costs can be capitalized when incurred in connection with obtaining the rights

On January 1, 2016, Check Co. bought a machine for $15,000. Residual value was estimated to be $1,400 and a five- year life was used for straight-line depreciation. On January 1, 2018, 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 2018.

Which one of the following disclosures is required by generally accepted accounting principles?

Devon Manufacturing Company purchased a new canning machine on July 1, 2015, for $190,000. The estimated salvage value is $15,000. The company uses units-of-production depreciation and estimates the machine will produce 125,000 units during its useful life. In 2015, the company manufactured 5,000 units after acquiring the machine. Depreciation expense for 2015 will be

On January 1, 2016, Flo, Inc. purchased an asset for $48,000. It was estimated that the asset life was seven years, after which it would have a residual value of $4,100. Assuming the use of the sum-of-the-years'-digits method, depreciation expense for 2016 would be

Exhibit 11-05 Wilson is preparing his tax returns using the MACRS convention. The following information relates to the purchase of an asset on January 1, Year 1. MACRS Depreciation as a Percentage of the Cost of the Asset -Refer to Exhibit 11-05, what amount of depreciation would have been recorded in Wilson's books for year 3?

Exhibit 11-1 On January 1, Year 1, Hills purchased equipment for $350,000. The equipment had an estimated useful life of ten years and an estimated residual value of $50,000. Use the double-declining-balance method to answer the following questions). -Refer to Exhibit 11-1. What is the net book value of this asset that Hills should report on the company's balance sheet at December 31, year 2?

When must a company recognize an impairment loss?

In what three respects does the computation for depreciation for federal income tax purposes and financial reporting purposes differ for assets purchased after 1987?

Which one of the following statements is true?

Which of the following is not considered involuntary disposal?

Consider the following: a. Regent Corp. bought a machine costing $22,400 on January 1, 2016. A six-year life was estimated, and a $1,400 residual value was expected. The sum-of-the-years'-digits depreciation method was used. Compute depreciation expense for 2020. b. The company bought a machine costing $50,000 on January 1, 2016 A six-year life was expected, and residual value was estimated to be $8,000. The 150%-declining-balance depreciation method was used. Compute depreciation expense for 2017.

Jonas Company purchased a photocopier that cost $15,000. The copier was expected to last for 1.25 million copies. In the first year of service the copier produced 180,000 copies, in the second year 250,000 copies and in the third year it had produced 175,000. The company decided to sell the machine for $6,500 in the third year. Required: 1) Record the purchase and the three years of depreciation. 2) Record the subsequent gain or loss on the disposal of the machine.

The MACRS differs from straight-line depreciation computed for financial reporting. In this respect, which of the following is not true?

Group depreciation is applied to heterogeneous assets.

The service life of an asset may be measured by all of the following except

Javlin Farms purchased three new tractors for $25,000 each. Javlin expects the tractors to have a useful life of 6 years and a residual value of $5,000. One of the tractors has not performed as expected, so Javlin sold the tractor after 2 years for $18,000. Javlin sold the remaining tractors for $5,000 at the end of the 6 years. Javlin uses group depreciation on a straight-line basis. Required: a.) Prepare the journal entry for the purchase. b.) Prepare the journal entry for the first and second year's depreciation. c.) Record the journal entry for the disposal of the tractor. d.) Record the journal entry for the third year's depreciation.