Question 1

Which amortization method is particularly appropriate where: (a) obsolescence is not the primary factor,(b) actual use can be accounted for,and (c) the service life in units of use can be estimated reliably?

Accepted Answer

A) Sum-of-the-years'-digits 
B) Double-declining balance 
C) Productive output 
D) Straight-line

Question 2

In the early years of an asset's useful life,the use of double-declining balance method of amortization will result in a more favourable debt-to-equity ratio than the straight-line method would.

Accepted Answer

A) True 
 B)False

Question 3

The Harvey Co.purchased a tooling machine on January 3,2011 for $420,000.The machine was being amortized on the straight-line method over an estimated useful life of 10 years,with no residual value.At the beginning of 2018,the company paid $105,000 to overhaul the machine.As a result of this improvement,the company estimated that the useful life of the machine would be extended an additional five years (15 years total).Calculate the amount of the amortization expense to be recorded for the machine in 2018.Harvey Co.has a calendar year-end and adjusting entries are only made at year-end.

Accepted Answer

The answer of The Harvey Co.purchased a tooling machine on...

Question 4

The Marc Corporation purchased factory equipment that was installed and put into service on January 2,2013,at a total cost of $48,000.Residual value was estimated at $3,000.The equipment is being amortized over four years using the double-declining balance method.Calculate for the year 2014,the amount Marc should record amortization expense on this equipment.

Accepted Answer

The answer of The Marc Corporation purchased factory equipment that...

Question 5

Yvon Co.,which has a calendar year accounting period,purchased a new machine for $30,000 on April 1,2013.At that time Yvon expected to use the machine for nine years and then sell it for $3,000.The machine was sold for $16,500 on September 30,2018.Assume the use of straight-line amortization,no amortization in the year of acquisition,and a full year of amortization in the year of retirement.Calculate the gain to be recognized at the time of sale.

Accepted Answer

The answer of Yvon Co.,which has a calendar year accounting...

Exam 10: Depreciation,Amortization,and Impairment

Which amortization method is particularly appropriate where: (a) obsolescence is not the primary factor,(b) actual use can be accounted for,and (c) the service life in units of use can be estimated reliably?

In the early years of an asset's useful life,the use of double-declining balance method of amortization will result in a more favourable debt-to-equity ratio than the straight-line method would.