Question 1

Briefly discuss why straight-line is most common depreciation method used in practice.

Accepted Answer

Straight-line depreciation is ...

Question 2

Belotti would record depletion in 2010 of:

Accepted Answer

A)  $54,667.
B)  $65,600.
C)  $52,480.
D)  $55,760.Depletion in 2010 = [($164,000 32,800)  (8,000 + 12,000) ] = $6.56 per ton 8,000 = $52,480E) B) and C)
F) A) and B)

Question 3

Briefly explain the differences between the terms depreciation, depletion, and amortization.

Accepted Answer

The terms refer to different t...

Question 4

In the first year of an asset's life, which of the following methods has the smallest depreciation?

Accepted Answer

A)  Straight-line.
B)  Declining balance.
C)  Sum-of-the-years' digits.
D)  Composite or group.E) A) and B)
F) A) and D)

Question 5

Accounting for a change in the estimated service life of equipment:

Accepted Answer

A)  Is handled prospectively.
B)  Requires retroactive restatement of prior year's financial statements.
C)  Requires a prior period adjustment.
D)  Is handled currently as a change in accounting principle.E) A) and D)
F) B) and C)

Question 6

Murgatroyd Co. purchased equipment on 1/1/07 for $500,000, estimating a four-year useful life and no residual value. In 2007 and 2008, Murgatroyd depreciated the asset using the sum-of-years'-digits method. In 2009, Murgatroyd changed to straight-line depreciation for this equipment. What depreciation would Murgatroyd record for the year 2009 on this equipment?

Accepted Answer

A)  $ 75,000.
B)  $125,000.
C)  $150,000.
D)  None of these is correct.The depreciation for 2007 was: $500,000 4/10 = $200,000.The depreciation for 2008 was: $500,000 3/10 = $150,000.This leaves a book value of $150,000 ($500,000 350,000) , so that the new depreciation would be $75,000 ($150,000 2) .E) A) and D)
F) A) and C)

Question 7

Using the sum-of-the-years'-digits method, depreciation for 2009 and book value at December 31, 2009 would be:

Accepted Answer

A)  $18,000 and $27,000.
B)  $16,000 and $29,000.
C)  $16,000 and $24,000.
D)  $18,000 and $22,000.Depreciation in 2009 = ($45,000 5,000)  4/10 = $16,000 Book value, 12/31/09 = $45,000 16,000 = $29,000E) B) and C)
F) All of the above

Question 8

Compute depreciation for 2009 and 2010 and the book value of the machinery at December 31, 2009 and 2010, assuming double-declining balance method is used.

Accepted Answer

Straight-line rate =...

Question 9

Which of the following types of subsequent expenditures is normally capitalized:

Accepted Answer

A)  Additions.
B)  Improvements.
C)  Rearrangements.
D)  All of these are normally capitalized.E) All of the above
F) B) and D)

Question 10

A change in the estimated useful life and residual value of machinery in the current year is handled as:

Accepted Answer

A)  A retrospective change back to the date of acquisition as though the current estimated life and residual value had been used all along.
B)  A prospective change from the current year through the remainder of its useful life, using the new estimates.
C)  A cumulative adjustment to income in the current year for the difference in depreciation under the new vs.old estimates.
D)  None of these is correct.E) None of the above
F) A) and B)

Question 11

One of the advantages of group and composite methods is that gains and losses on the disposal of individual assets need not be computed.

Accepted Answer

A) True 
 B)False

Question 12

Weaver Textiles Inc. has used the straight-line method to depreciate its equipment since it started business in 2005. At the beginning of 2009, the company decided to change to the double-declining-balance (DDB). method. Depreciation as reported and as it would have been reported if the company had always used DDB is listed below:
Required:
What journal entry, if any, should Weaver make to record the effect of the accounting change (ignore income taxes)? Explain.
 $\begin{array}{rrr}\text { Year }& \text { Straight-Line } & \text { DDB } \
2005 & \$ 22,000 & \$ 45,000 \
2006 & 25,000 & 40,000 \
2007 & 28,000 & 38,000 \
2008 & 28,000 & 32,000
\end{array}$

Accepted Answer

The change in depreciation method is tre...

Question 13

A major expenditure increased a truck's life beyond the original estimate of life. GAAP permits the expenditure to be debited to:

Accepted Answer

A)  Repairs.
B)  Accumulated depreciation.
C)  Major repairs.
D)  None of these.E) A) and C)
F) None of the above

Question 14

In January of 2009, Vega Corporation purchased a patent at a cost of $200,000. Legal and filing fees of $50,000 were paid to acquire the patent. The company estimated a 10-year useful life for the patent and uses the straight-line amortization method for all intangible assets. In 2012, Vega spent $40,000 in legal fees for an unsuccessful defense of the patent. The amount charged to income (expense and loss)  in 2012 related to the patent should be:

Accepted Answer

A)  $ 40,000.
B)  $ 65,000.
C)  $215,000.
D)  $ 25,000.E) None of the above
F) All of the above

Question 15

Briefly explain the following statement. Depreciation is a process of cost allocation, not valuation.

Accepted Answer

Periodic depreciation is not a...

Question 16

Asset C3PO has a depreciable base of $16.5 million and a service life of 10 years. What would the accumulated depreciation be at the end of year five under the sum-of-the-years' digits method?

Accepted Answer

A)  $ 4.5 million.
B)  $8.25 million.
C)  $ 12 million.
D)  None of these is correct.$16.5 million [(10 + 9 + 8 + 7 + 6) /55] = $12 millionE) All of the above
F) B) and C)

Question 17

The depreciable base for an asset is:

Accepted Answer

A)  Its service life.
B)  The excess of its cost over residual value.
C)  The difference between its replacement value and cost.
D)  The amount allowable under MACRSE) All of the above
F) C) and D)

Question 18

Using the straight-line method, depreciation for 2009 and book value at December 31, 2009, would be:

Accepted Answer

A)  $10,000 and $30,000.
B)  $11,250 and $28,750.
C)  $10,000 and $35,000.
D)  $11,250 and $33,750.Depreciation in 2009 = ($45,000 5,000)  4 = $10,000 Book value, 12/31/09 = $45,000 10,000 = $35,000E) All of the above
F) A) and B)

Question 19

Broadway Ltd. purchased equipment on 1/1/07 for $800,000, estimating a five-year useful life and no residual value. In 2007 and 2008, Broadway depreciated the asset using the straight-line method. In 2009, Broadway changed to sum-of-years'-digits depreciation for this equipment. What depreciation would Broadway record for the year 2009 on this equipment?

Accepted Answer

A)  $120,000.
B)  $160,000.
C)  $200,000.
D)  $240,000.The depreciation for 2007 and 2008 was: $800,000 5 = $160,000 per year.This leaves a book value of $480,000 ($800,000 320,000)  and three years remain in the asset's life.Under SYD, the remaining depreciable base would be multiplied by 3 (1 + 2 + 3)  for 2010, or 3/6 $480,000 = $240,000 in depreciation.E) B) and D)
F) B) and C)

Question 20

Depreciation, depletion, and amortization:

Accepted Answer

A)  All refer to the process of allocating the cost of operational assets over future periods.
B)  All generally utilize the same methods of cost allocation.
C)  Are all handled the same in arriving at taxable income.
D)  All of these are correct.E) A) and B)
F) None of the above

Exam 11: Operational Assets: Utilization and Impairment

Correct Answer
verified

One of the advantages of group and composite methods is that gains and losses on the disposal of individual assets need not be computed.

Correct Answer
verified

Briefly explain the differences between the terms depreciation, depletion, and amortization.

Correct Answer
verified
The terms refer to different t...
View Answer

In the first year of an asset's life, which of the following methods has the smallest depreciation?

Correct Answer
verified

Correct Answer
verified

Asset C3PO has a depreciable base of $16.5 million and a service life of 10 years. What would the accumulated depreciation be at the end of year five under the sum-of-the-years' digits method?

Correct Answer
verified

Briefly explain the following statement. Depreciation is a process of cost allocation, not valuation.

Correct Answer
verified
Periodic depreciation is not a...
View Answer

A change in the estimated useful life and residual value of machinery in the current year is handled as:

Correct Answer
verified

A major expenditure increased a truck's life beyond the original estimate of life. GAAP permits the expenditure to be debited to:

Correct Answer
verified

Correct Answer
verified

The depreciable base for an asset is:

Correct Answer
verified

Using the straight-line method, depreciation for 2009 and book value at December 31, 2009, would be:

Correct Answer
verified

Briefly discuss why straight-line is most common depreciation method used in practice.

Correct Answer
verified
Straight-line depreciation is ...
View Answer

Using the sum-of-the-years'-digits method, depreciation for 2009 and book value at December 31, 2009 would be:

Correct Answer
verified

Accounting for a change in the estimated service life of equipment:

Correct Answer
verified

Belotti would record depletion in 2010 of:

Correct Answer
verified

Correct Answer
verified
The change in depreciation method is tre...
View Answer

Compute depreciation for 2009 and 2010 and the book value of the machinery at December 31, 2009 and 2010, assuming double-declining balance method is used.

Correct Answer
verified
Straight-line rate =...
View Answer

Depreciation, depletion, and amortization:

Correct Answer
verified

Which of the following types of subsequent expenditures is normally capitalized:

Correct Answer
verified

Exam 11: Operational Assets: Utilization and Impairment

Correct AnswerverifiedShow Answer

One of the advantages of group and composite methods is that gains and losses on the disposal of individual assets need not be computed.

Correct AnswerverifiedShow Answer

Briefly explain the differences between the terms depreciation, depletion, and amortization.

Correct AnswerverifiedThe terms refer to different t...View AnswerShow Answer

In the first year of an asset's life, which of the following methods has the smallest depreciation?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Asset C3PO has a depreciable base of $16.5 million and a service life of 10 years. What would the accumulated depreciation be at the end of year five under the sum-of-the-years' digits method?

Correct AnswerverifiedShow Answer

Briefly explain the following statement. Depreciation is a process of cost allocation, not valuation.

Correct AnswerverifiedPeriodic depreciation is not a...View AnswerShow Answer

A change in the estimated useful life and residual value of machinery in the current year is handled as:

Correct AnswerverifiedShow Answer

A major expenditure increased a truck's life beyond the original estimate of life. GAAP permits the expenditure to be debited to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The depreciable base for an asset is:

Correct AnswerverifiedShow Answer

Using the straight-line method, depreciation for 2009 and book value at December 31, 2009, would be:

Correct AnswerverifiedShow Answer

Briefly discuss why straight-line is most common depreciation method used in practice.

Correct AnswerverifiedStraight-line depreciation is ...View AnswerShow Answer

Using the sum-of-the-years'-digits method, depreciation for 2009 and book value at December 31, 2009 would be:

Correct AnswerverifiedShow Answer

Accounting for a change in the estimated service life of equipment:

Correct AnswerverifiedShow Answer

Belotti would record depletion in 2010 of:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe change in depreciation method is tre...View AnswerShow Answer

Compute depreciation for 2009 and 2010 and the book value of the machinery at December 31, 2009 and 2010, assuming double-declining balance method is used.

Correct AnswerverifiedStraight-line rate =...View AnswerShow Answer

Depreciation, depletion, and amortization:

Correct AnswerverifiedShow Answer

Which of the following types of subsequent expenditures is normally capitalized:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The terms refer to different t...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Periodic depreciation is not a...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Straight-line depreciation is ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The change in depreciation method is tre...
View Answer

Correct Answer
verified
Straight-line rate =...
View Answer

Correct Answer
verified

Correct Answer
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