Exam 11: Depreciation, Depletion, Impairment, and Disposal

Assets sold on or before the 15th are not considered owned for the month based on the nearest whole month convention.

What costs can be capitalized as part of the cost of a natural resource?

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, 2013. -Refer to Exhibit 11-05, what amount of depreciation would be recorded on the income tax returns for year 5?

List the time based allocation methods of cost allocation, provide a brief explanation of each.

The Roberto Company purchased a limo for $75,000 on October 10, 2014. The limo has a salvage value of $5,000 and an eight-year useful life. The company uses double-declining-balance depreciation. Required: Compute depreciation expense for 2014 using the a.nearest whole month method b.nearest whole year method c.half-year convention method

On January 1, 2014, Lefty, Inc. purchased a machine for $6,000. The estimated life and residual value were five years and $150, respectively. The machine will produce approximately 80,000 units over its life. In 2014 and 2015, the machine produced 10,000 and 15,000 units, respectively. In 2015, Lefty recorded $1,440 of depreciation expense. The depreciation method in use was the

Which one of the following statements is true?

Under the MACRS principles the residual value is eliminated.

What effect does depreciation have on the calculation of the rate of return on total assets?

Exhibit 11-04 Kieso Company purchased a tract of land for $4,500,000 in anticipation of extracting 1,425,000 tons of ore. The residual value of the land is expected to be $480,000. The company mines 125,000 tons of ore in the first year. -Refer to Exhibit 11-04, what amount of depletion was recorded in that first year?

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

Generally, IFRS require asset impairments to be recorded sooner than U.S. GAAP requires recognition. Required: Discuss the differences between IFRS and GAAP procedures for identifying and measuring asset impairments, and explain why the IFRS approach is likely to result in write-downs sooner.

Which of the following is not a factor in computing depreciation for a period?

When a company disposes of an asset by abandonment the disclosure of the gain or loss equals the fair market value.

On January 1, 2014, 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, 2016, 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 2016.

GAAP now requires that impairment losses be recognized when they occur to reflect the fair value of productive assets. Required: Discuss three of the concerns that some accountants have about this practice.

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

On July 9, 2013, March Company purchased an asset for $18,000. Marcus estimated a four-year life and no salvage value. Marcus uses sum-of-the-years'-digits depreciation to the nearest whole month. Depreciation expense for 2016 will be

As part of the normal activities of company's assets are sold or disposed. What steps are necessary in order to complete an asset disposal?

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, 2013. -Refer to Exhibit 11-05, what amount of depreciation would be recorded on the income tax returns for year 3?