Exam 11: Depreciation, Depletion, Impairment, and Disposal

A company purchased ten delivery vehicles at a cost of $20,000 each and used the group depreciation method. Which of the following entries would be correct when recording the subsequent sale of a vehicle for $8,500 (group accumulated depreciation is $88,000)?

The following are a list of terms: Required: Match each term with the appropriate definition from below.

What type of cost allocation must a company use?

Mark Industries uses the straight-line depreciation method. One asset had been purchased for $11,000. Annual depreciation expense was $2,000 after considering residual value of $1,000. What was the approximate life of the asset?

What determines residual value?

Which one of the following statements is not true?

An example of an event where the book value of property, plant, and equipment may not be recoverable would include

Property, plant, and equipment must be reviewed for impairment when which one of the following events occurs?

Five skid steers costing $20,000 each were purchased by the Biggs Excavating Company at the beginning of 2014. Biggs capitalized the skid steers in a single asset account and depreciates them using the group method. Each skid steer was expected to have a residual value of $6,000 in four years. At the end of 2017, Biggs sold one skid steer for $8,000. For what amount is accumulated depreciation debited in the journal entry to record the disposal of that skid steer?

Under the MACRS principles the tax life winds up being shorter in most cases compared to an assets economic life.

On January 1, 2014, World Inc. purchased five machines at a cost of $14,000 each. The company adopted the group (straight-line) depreciation method, using an eight-year life with a $2,800 salvage value per machine. Correct depreciation was recorded in 2014 and 2015. On January 1, 2016, one of the machines was sold for $6,500. On January 3, 2016, a new unrelated piece of equipment was purchased for $15,000 with no salvage value and a six-year life. It will be depreciated using the straight-line method. Required: Prepare appropriate journal entries for a.January 1, 2016 b.December 31, 2016, to record depreciation expense

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 preformed as expected, therefore Javlin sold the tractor after 2 years for $18,000. Javlin sells the remaining tractors for $5,000 at the end of the 6 years. Javlin uses group depreciation on a 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 years depreciation.

Depreciation of an asset based on the number of hours of usage is a(n)

On January 1, 2013, Morgantown Co. purchased five machines at a price of $10,000 per machine. Because the estimated life was five years and no salvage value was expected, a group depreciation rate of 20% was used. On January 1, 2015, one of the machines was sold for $5,000. The correct entry to record the sale of the machine is

When must a company recognize an impairment loss ?

Assets from time to time become impaired. GAAP requires companies to review their asset for impairment. This review should take place whenever events or circumstances indicate the carrying value of the asset my not be recoverable. Provide three example in which events or circumstances may cause a company to review their assets for impairment.

The Antarctica Co. acquired a machine on January 1, 2013, at a cost of $60,000. The machine is expected to have a ten-year life and a residual value of $5,000. The estimated lifetime output from the machine is expected to be 55,000 units. Under which of the following depreciation methods would the depreciation charge be the greatest in 2013 if 9,100 units were produced during the year?

When low-cost depreciable assets with similar characteristics, service lives, and residual values are acquired, which depreciation method should be used?

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Exhibit 11-03 On January 1, 2014, Wheeler, Inc. purchased some equipment for $3,900. The equipment had an estimated life of five years and an expected residual value of $200. On July, 1, 2016, the equipment was sold for $1,000. -Refer to Exhibit 11-03, what is the amount of depreciation expense that needs to be brought up to date prior to the sale?