Question 1

Depreciation expense is listed on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) Straight-line method 
B) Units-of-production method 
C) Declining-balance method 
D) None of these 
E) All of these 
A) Straight-line method 
B) Units-of-production method 
C) Declining-balance method 
D) None of these 
E) All of these

Question 3

Depreciation expense results in an indirect tax savings.

Accepted Answer

A) True 
 B)False

Question 4

The Life Sciences Division purchased new equipment for manufacturing products. The cost of the new machinery was $160,000. Using a five-year class, what is the expense in year 3 of the MACRS?

Accepted Answer

The answer of The Life Sciences Division purchased new equipment...

Question 5

Residual value means the actual cash one receives at end of the life of the asset.

Accepted Answer

A) True 
 B)False

Question 6

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?

Accepted Answer

A) $16,000 
B) $12,500 
C) $14,500 
D) $1,500 
E) None of these 
A) $16,000 
B) $12,500 
C) $14,500 
D) $1,500 
E) None of these

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Find the Annual Recovery for Year 1.
 $$\begin{array} { | c | c | c | c | c | } 
\hline \text { Method } & \text { Purchased } & \text { Cost } & \text { Recovery Class } & \begin{array} { c } 
\text { Annual Recovery for } \
\text { Year 1 }
\end{array} \
\hline \text { MACRS } & \text { July 15 } & \$ 21,000 & 10 & \text { A } \
\hline
\end{array}$$

Accepted Answer

The answer of Find the Annual Recovery for Year 1.
...

Question 9

Bob bought a new delivery truck for his drug store for $30,000. The residual value is $3,000 with an expected life of five years. Assuming twice the straight-line rate, calculate the book value at the end of year 2 for the declining-balance method.

Accepted Answer

The answer of Bob bought a new delivery truck for...

Question 10

In the declining-balance method, we can depreciate below the residual value.

Accepted Answer

A) True 
 B)False

Question 11

Book value is cost plus accumulated depreciation.

Accepted Answer

A) True 
 B)False

Question 12

If Boeing depreciates its equipment that cost $120,000 over six years, using a straight-line depreciation schedule, at what rate is it reducing its value by each year, assuming there is no residual value?

Accepted Answer

$120,000 /

Question 13

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?

Accepted Answer

($25,000 - $5,000)/ 5 = $4,000

Question 14

Tom purchased a condo in Mississippi for rental property at a cost of $106,600. Using the class recovery period for assets, how many years will he be able to depreciate the property and what is the amount each year?

Accepted Answer

The answer of Tom purchased a condo in Mississippi for...

Question 15

Karen Knoll Co. bought a machine that cost $8,000. The residual value is $1,000, and the machine life is estimated at four years. Can you prepare a depreciation schedule assuming twice the straight-line rate? Karen uses the declining-balance method.

Accepted Answer

Depr Exp 1:$8,000 × .5 = $4,000; Book Va

Question 16

Book value is:

Accepted Answer

A) Cost plus accumulated depreciation 
B) Cost minus accumulated depreciation 
C) Cost divided by accumulated depreciation 
D) Cost times accumulated depreciation 
E) None of these 
A) Cost plus accumulated depreciation 
B) Cost minus accumulated depreciation 
C) Cost divided by accumulated depreciation 
D) Cost times accumulated depreciation 
E) None of these

Question 17

Match the following terms with their definitions.
-Residual value

Accepted Answer

A) Residual value not deducted in calculation 
B) Even amount of depreciation expense each year 
C) Depreciation based on usage 
D) Depreciation that has been built up 
E) An allocation of the cost of an asset
F)Estimated life of asset
G)Cost minus accumulated depreciation
H)1 divided by number of years of expected life
I)A table showing depreciation allocation
J)Estimated value after AFIC depreciation taken
K)Result of Tax Reform Act of 1986
L)Salvage value 
A) Residual value not deducted in calculation 
B) Even amount of depreciation expense each year 
C) Depreciation based on usage 
D) Depreciation that has been built up 
E) An allocation of the cost of an asset
F)Estimated life of asset
G)Cost minus accumulated depreciation
H)1 divided by number of years of expected life
I)A table showing depreciation allocation
J)Estimated value after AFIC depreciation taken
K)Result of Tax Reform Act of 1986
L)Salvage value

Question 18

Using MACRS 7 year class, what is depreciation in year 2 on furniture costing $12,000?

Accepted Answer

The answer of Using MACRS 7 year class, what is...

Question 19

Straight-line depreciation does not:

Accepted Answer

A) Use residual to calculate yearly depreciation 
B) Have a book value 
C) Accelerate depreciation 
D) Let the cost remain the same 
E) None of these 
A) Use residual to calculate yearly depreciation 
B) Have a book value 
C) Accelerate depreciation 
D) Let the cost remain the same 
E) None of these

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 17: Depreciation

Depreciation expense is listed on the balance sheet.

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

Depreciation expense results in an indirect tax savings.

The Life Sciences Division purchased new equipment for manufacturing products. The cost of the new machinery was $160,000. Using a five-year class, what is the expense in year 3 of the MACRS?

Residual value means the actual cash one receives at end of the life of the asset.

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.

Find the Annual Recovery for Year 1. Method Purchased Cost Recovery Class Annual Recovery for Year 1 MACRS July 15 \ 21,000 10 A

Bob bought a new delivery truck for his drug store for $30,000. The residual value is $3,000 with an expected life of five years. Assuming twice the straight-line rate, calculate the book value at the end of year 2 for the declining-balance method.

In the declining-balance method, we can depreciate below the residual value.

Book value is cost plus accumulated depreciation.

If Boeing depreciates its equipment that cost $120,000 over six years, using a straight-line depreciation schedule, at what rate is it reducing its value by each year, assuming there is no residual value?

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?

Tom purchased a condo in Mississippi for rental property at a cost of $106,600. Using the class recovery period for assets, how many years will he be able to depreciate the property and what is the amount each year?

Karen Knoll Co. bought a machine that cost $8,000. The residual value is $1,000, and the machine life is estimated at four years. Can you prepare a depreciation schedule assuming twice the straight-line rate? Karen uses the declining-balance method.

Book value is:

Match the following terms with their definitions. -Residual value

Using MACRS 7 year class, what is depreciation in year 2 on furniture costing $12,000?

Straight-line depreciation does not:

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

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