Question 1

All assets that last longer than one year will be depreciated.

Accepted Answer

A) True 
 B)False

Question 2

Depreciation expense is located on the:

Accepted Answer

A) Income statement 
B) Balance sheet 
C) Income statement and Balance sheet 
D) None of these 
E) All of these 
A) Income statement 
B) Balance sheet 
C) Income statement and Balance sheet 
D) None of these 
E) All of these

Question 3

Using the straight-line method, what is the depreciation expense for a computer that cost $4,500, has a residual value of $700, and has a life of four years?

Accepted Answer

A) $1,125 
B) $950 
C) $1,300 
D) $1,950 
E) None of these 
A) $1,125 
B) $950 
C) $1,300 
D) $1,950 
E) None of these

Question 4

Martha Run buys a new duplicating machine for $20,000 with a residual value of $2,000. Its estimated life is five years. Using the declining-balance method, calculate the book value at the end of year 1, assuming twice the straight-line rate.

Accepted Answer

$20,000 × .4 = $8,00

Question 5

In a straight-line depreciation schedule, the depreciation expense is the same each year.

Accepted Answer

A) True 
 B)False

Question 6

What is the depreciation expense for the first year straight-line method using the following? $$\begin{array} { | l | c | } 
\hline \text { Cost of Car } & \$ 26,000 \
\hline \text { Residual Value } & \$ 6,000 \
\hline \text { Life } & 5 \text { years } \
\hline
\end{array}$$

Accepted Answer

A) $4,400 
B) $5,200 
C) $4,000 
D) $6,000 
E) None of these 
A) $4,400 
B) $5,200 
C) $4,000 
D) $6,000 
E) None of these

Question 7

A truck costs $8,000 with a residual value of $1,000. The truck is expected to have a useful life of 70,000 miles. Assuming the truck is driven 15,000 miles the first year, the depreciation expense would be:

Accepted Answer

A) $1,714 
B) $1,500 
C) $1,174 
D) $1,505 
E) None of these 
A) $1,714 
B) $1,500 
C) $1,174 
D) $1,505 
E) None of these

Question 8

A new truck costing $60,000 with a residual value of $6,000 has an estimated useful life of five years. Using the declining-balance method at twice the straight-line rate, the depreciation expense in year 2 is:

Accepted Answer

A) $24,000 
B) $14,000 
C) $14,400 
D) $2,400 
E) None of these 
A) $24,000 
B) $14,000 
C) $14,400 
D) $2,400 
E) None of these

Question 9

Depreciation is an exact science that requires no estimation.

Accepted Answer

A) True 
 B)False

Question 10

Adjax bought a machine for $86,000. Its estimated life is 10 years with a residual value of $6,000. Using the straight-line method, what is the book value of the machine at the end of year 2?

Accepted Answer

$86,000 - $6,000 = $

Question 11

Match the following terms with their definitions.
-Depreciation schedule

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 12

Find the Annual Recovery for Year 1.
 $$\begin{array} { | c | c | c | c | c | } 
\hline \text { Method } & \text { Purchased } & \text { Cost } & \text { Recovery Class } & \begin{array} { c } 
\text { Annual Recovery for } \
\text { Year } 1
\end{array} \
\hline \text { MACRS } & \text { May } 3 & \$ 18,000 & 3 & \text { A } \
\hline
\end{array}$$

Accepted Answer

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

Question 13

The Modified Accelerated Cost Recovery System must be used for both financial and tax reporting.

Accepted Answer

A) True 
 B)False

Question 14

For partial-years depreciation, if an asset is purchased on February 8, how many months' depreciation will be taken for the year?

Accepted Answer

A) 12 
B) 11 
C) 10 
D) 9 
E) None of these 
A) 12 
B) 11 
C) 10 
D) 9 
E) None of these

Question 15

Using the declining-balance method, complete the table as shown (twice the straight-line rate):
Auto: $30,000
Estimated life: 5 years
Residual value: $800
 $\begin{array}{|c|c|c|c|c|c|c|}
\hline \text { Year } & \text { Cost } & \begin{array}{l}
\text { Accumulated } \
\text { Depreciation } \
\text { B.O.Y. }
\end{array} & \begin{array}{l}
\text { Book Value } \
\text { B.O.Y }
\end{array} & \begin{array}{l}
\text { Depreciation } \
\text { Expense }
\end{array} & \begin{array}{l}
\text { Accumulated } \
\text { Depreciation } \
\text { E.O.Y. }
\end{array} & \begin{array}{l}
\text { Book Value } \
\text { E.O.Y }
\end{array} \
\hline 1& \$ 30,000 & \text { A } & B & \text { C } & \text { D } & E \
\hline2 & \$ 30,000 & F & G & \mathrm{H} & \text { I } & \mathrm{J} \
\hline 3& \$ 30,000 &K & L &M& N& 0 \
\hline
\end{array}$

Accepted Answer

A. $0; B. $30,000; C. $12,000;

Question 16

Hank bought a four-family residence for rental property. Hank put 20% down on the $300,000 rental unit. How much will he be able to depreciate using the class recovery period for residential rental property each year?

Accepted Answer

The answer of Hank bought a four-family residence for rental...

Question 17

The book value in the units-of-production method should never go below the residual value.

Accepted Answer

A) True 
 B)False

Question 18

A truck costing $25,000 with a residual value of $5,000 was purchased by Rim Corporation. The truck's estimated life is 10 years. At the end of year 2 what is the book value using the declining-balance method? Assume a depreciation rate of twice the straight-line rate.

Accepted Answer

$25,000 × .2 = $5,000; $25,000

Question 19

Match the following terms with their definitions.
-Straight-line method

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 20

Residual value is deducted in calculating depreciation expense in the declining-balance method.

Accepted Answer

A) True 
 B)False

Exam 17: Depreciation

All assets that last longer than one year will be depreciated.

Depreciation expense is located on the:

Using the straight-line method, what is the depreciation expense for a computer that cost $4,500, has a residual value of $700, and has a life of four years?

Martha Run buys a new duplicating machine for $20,000 with a residual value of $2,000. Its estimated life is five years. Using the declining-balance method, calculate the book value at the end of year 1, assuming twice the straight-line rate.

In a straight-line depreciation schedule, the depreciation expense is the same each year.

What is the depreciation expense for the first year straight-line method using the following? Cost of Car \ 26,000 Residual Value \ 6,000 Life 5 years

A truck costs $8,000 with a residual value of $1,000. The truck is expected to have a useful life of 70,000 miles. Assuming the truck is driven 15,000 miles the first year, the depreciation expense would be:

A new truck costing $60,000 with a residual value of $6,000 has an estimated useful life of five years. Using the declining-balance method at twice the straight-line rate, the depreciation expense in year 2 is:

Depreciation is an exact science that requires no estimation.

Adjax bought a machine for $86,000. Its estimated life is 10 years with a residual value of $6,000. Using the straight-line method, what is the book value of the machine at the end of year 2?

Match the following terms with their definitions. -Depreciation schedule

Find the Annual Recovery for Year 1. Method Purchased Cost Recovery Class Annual Recovery for Year 1 MACRS May 3 \ 18,000 3 A

The Modified Accelerated Cost Recovery System must be used for both financial and tax reporting.

For partial-years depreciation, if an asset is purchased on February 8, how many months' depreciation will be taken for the year?

Hank bought a four-family residence for rental property. Hank put 20% down on the $300,000 rental unit. How much will he be able to depreciate using the class recovery period for residential rental property each year?

The book value in the units-of-production method should never go below the residual value.

A truck costing $25,000 with a residual value of $5,000 was purchased by Rim Corporation. The truck's estimated life is 10 years. At the end of year 2 what is the book value using the declining-balance method? Assume a depreciation rate of twice the straight-line rate.

Match the following terms with their definitions. -Straight-line method

Residual value is deducted in calculating depreciation expense in the declining-balance method.

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