FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 11: Depreciation, Impairments, and Depletion

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 31

Multiple Choice

Review LaterAdd Note

Review Later

Jantz Corporation purchased a machine on July 1, 2004, for $750,000.The machine was estimated to have a useful life of 10 years with an estimated salvage value of $42,000.During 2007, it became apparent that the machine would become uneconomical after December 31, 2011, and that the machine would have no scrap value.Accumulated depreciation on this machine as of December 31, 2006, was $177,000.What should be the charge for depreciation in 2007 under generally accepted accounting principles?

A) $106,200
B) $114,600
C) $123,000
D) $143,250

E) A) and D)
F) A) and C)

Correct Answer

verified

Show Answer

Question 32

True/False

Review LaterAdd Note

Review Later

Depreciation is a means of cost allocation, not a matter of valuation.

A) True
B) False

Correct Answer

verified

Show Answer

Question 33

Multiple Choice

Review LaterAdd Note

The term "depreciable cost," or "depreciable base," as it is used in accounting, refers to

A plant asset with a five-year estimated useful life and no residual value is sold at the end of the second year of its useful life.How would using the sum-of-the-years'-digits method of depreciation instead of the double-declining balance method of depreciation affect a gain or loss on the sale of the plant asset? $\begin{array}{lll}&\text { Gain } &\text { loss } \\\text { a. } & \text { Decrease } & \text { Decrease } \\b.&\text { Decrease } & \text { Increase } \\\text { c. } & \text { Increase } & \text { Decrease } \\\text { d. } & \text { Increase } & \text { Increase }\end{array}$

For income statement purposes, depreciation is a variable expense if the depreciation method used is

Use of the double-declining balance method

The book value of a plant asset is

The first step in determining whether an impairment has occurred is to estimate the future net cash flows expected from the use of that asset and its eventual disposition.

George Martin Corporation purchased a depreciable asset for $300,000 on January 1, 2005.The estimated salvage value is $30,000, and the estimated useful life is 9 years.The straight-line method is used for depreciation.In 2008, George Martin changed its estimates to a total useful life of 5 years with a salvage value of $50,000.What is 2008 depreciation expense?

Normally, companies compute depletion on a straight-line basis.

The three factors involved in the depreciation process are the depreciation base, the useful life, and the risk of obsolescence.

Covington Company reported the following data: $\begin{array}{lrr}&2007&2008\\\text { Sales } & \$ 2,000,000 & \$ 2,600,000 \\\text { Net Income } & 300,000 & 400,000 \\\text { Assets at year end } & 1,800,000 & 2,500,000 \\\text { Liabilities at year end } & 1,100,000 & 1,500,000\end{array}$ What is Rubber Soul's asset turnover for 2008?

Depreciation, depletion, and amortization all involve the allocation of the cost of a long-lived asset to expense.

Prentice Company purchased a depreciable asset for $200,000.The estimated salvage value is $20,000, and the estimated useful life is 10 years.The straight-line method will be used for depreciation.What is the depreciation base of this asset?

Reserve recognition accounting

An impairment loss is the amount by which the carrying amount of the asset exceeds the sum of the expected future net cash flows from the use of that asset.

Depreciation is based on the decline in the fair market value of the asset.

Windsor Company purchased a depreciable asset for $300,000 on April 1, 2005.The estimated salvage value is $30,000, and the estimated total useful life is 5 years.The straight-line method is used for depreciation.What is the balance in accumulated depreciation on May 1, 2008 when the asset is sold?

Norris Corporation purchased factory equipment that was installed and put into service January 2, 2006, at a total cost of $60,000.Salvage value was estimated at $4,000.The equipment is being depreciated over four years using the double-declining balance method.For the year 2007, Norris should record depreciation expense on this equipment of

Garrison Corporation purchased a depreciable asset for $420,000 on January 1, 2005.The estimated salvage value is $42,000, and the estimated total useful life is 9 years.The straight-line method is used for depreciation.In 2008, Garrison changed its estimates to a useful life of 5 years with a salvage value of $70,000.What is 2008 depreciation expense?