Question 1

Physical deterioration is related to an asset's estimated amount of usefulness.

Accepted Answer

A) True 
 B)False  True

Question 2

Find the Annual Recovery for Year 1.
 $$\begin{array} { | c | c | c | c | c | } 
\hline \text { Method } & \text { Purchased } & \text { Cost } & \text { Recovery Class } & \begin{array} { c } 
\text { Annual Recovery for } \
\text { Year 1 }
\end{array} \
\hline \text { MACRS } & \text { Nov } 5 & \$ 12,000 & 3 & \text { A } \
\hline
\end{array}$$

Accepted Answer

$3,960

Question 3

Find the Annual Recovery for Year 1.
 $$\begin{array} { | l | l | l | l | l | } 
\hline \text { Method } & \text { Purchased } & \text { Cost } & \text { Recovery Class } & \text { Annual Recovery for Year 1 } \
\hline \text { MACRS } & \text { July } 8 & \$ 6,000 & 5 & \text { A }\
\hline
\end{array}$$

Accepted Answer

$1200

Question 4

A truck costs $9,200 with a residual value of $1,000. It is estimated that the useful life of the truck is four years. The amount of depreciation expense in year 2 using the declining-balance method at twice the straight-line rate is:

Accepted Answer

A) $2,200 
B) $4,400 
C) $3,200 
D) $6,400 
E) None of these 
A) $2,200 
B) $4,400 
C) $3,200 
D) $6,400 
E) None of these

Question 5

A truck costs $35,000 with a residual value of $2,000. Its service life is five years. Using the declining-balance method at twice the straight-line rate, the book value at the end of year 2 is:

Accepted Answer

A) $35,000 
B) $22,000 
C) $12,600 
D) $33,000 
E) None of these 
A) $35,000 
B) $22,000 
C) $12,600 
D) $33,000 
E) None of these

Question 6

A non-luxury car will depreciate.

Accepted Answer

A) True 
 B)False

Question 7

Jay Corp. bought a machine for $15,000. The machine is expected to produce 10,000 units. The machine has a residual value of $5,000. Assuming the machine produces 400 units during year 1, what should the depreciation expense be?

Accepted Answer

($15,000 - $5,000)/1

Question 8

Land can be depreciated.

Accepted Answer

A) True 
 B)False

Question 9

Cost minus residual divided by number of years equals depreciation expense taken each year in the straight-line method.

Accepted Answer

A) True 
 B)False

Question 10

In the straight-line method, book value never goes below the residual value.

Accepted Answer

A) True 
 B)False

Question 11

John Morse Corporation buys a van for $16,000. The estimated life of the van is four years. The residual value of the van is $4,000. After two years, the van is sold for $8,000. What was the difference between the book value and the amount received from selling the van if John used the straight-line method of depreciation?

Accepted Answer

$16,000 - $4,000 = $12,000; $1

Question 12

Match the following terms with their definitions.
-Trade-in

Accepted Answer

A) Residual value not deducted in calculation 
B) Even amount of depreciation expense each year 
C) Depreciation based on usage 
D) Depreciation that has been built up 
E) An allocation of the cost of an asset
F)Estimated life of asset
G)Cost minus accumulated depreciation
H)1 divided by number of years of expected life
I)A table showing depreciation allocation
J)Estimated value after AFIC depreciation taken
K)Result of Tax Reform Act of 1986
L)Salvage value 
A) Residual value not deducted in calculation 
B) Even amount of depreciation expense each year 
C) Depreciation based on usage 
D) Depreciation that has been built up 
E) An allocation of the cost of an asset
F)Estimated life of asset
G)Cost minus accumulated depreciation
H)1 divided by number of years of expected life
I)A table showing depreciation allocation
J)Estimated value after AFIC depreciation taken
K)Result of Tax Reform Act of 1986
L)Salvage value

Question 13

Complete the following (use the straight-line method):
Auto: $40,000; Residual: $4,000; Estimated Life: 5 Yrs
 $$\begin{array} { | c | c | c | c | c | } 
\hline \text { Year } & \text { Cost } & \begin{array} { c } 
\text { Depreciation } \
\text { Expense }
\end{array} & \begin{array} { c } 
\text { Accumulated } \
\text { Depreciation }
\end{array} & \text { Book Value } \
\hline 1 & \mathrm {~A} & \mathrm {~B} & \mathrm { C } & \mathrm { D } \
\hline 2 & \mathrm { E } & \mathrm { F } & \mathrm { G } & \mathrm { H } \
\hline 3 & \mathrm { I } & \mathrm { J } & \mathrm { K } & \mathrm { L } \
\hline
\end{array}$$

Accepted Answer

A. $40,000; B. $7,200; C. $7,2

Question 14

Which one is not based on the passage of time?

Accepted Answer

A) Straight-line method 
B) Declining-balance method 
C) Units-of-production method 
D) None of these 
E) All of these 
A) Straight-line method 
B) Declining-balance method 
C) Units-of-production method 
D) None of these 
E) All of these

Question 15

Using the declining-balance method, complete the table as shown (twice the straight-line rate):
Auto: $29,000; Residual: $2,000; Estimated Life: 5 Yrs
 $$\begin{array} { | c | c | c | c | c | c | c | } 
\hline \text { Year } & \text { Cost } & \begin{array} { c } 
\text { Accumulated } \
\text { Depreciation } \
\text { B.O.Y. }
\end{array} & \begin{array} { c } 
\text { Book Value } \
\text { B.O.Y }
\end{array} & \begin{array} { c } 
\text { Depreciation } \
\text { Expense }
\end{array} & \begin{array} { c } 
\text { Accumulated } \
\text { Depreciation } \
\text { E.O.Y. }
\end{array} & \begin{array} { c } 
\text { Book Value } \
\text { E.O.Y }
\end{array} \
\hline 1 & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } & \text { F } \
\hline 2 & \mathrm { G } & \mathrm { H } & \mathrm { I } & \mathrm { J } & \mathrm { K } & \mathrm { L } \
\hline 3 & \mathrm { M } & \mathrm { N } & \mathrm { O } & \mathrm { P } & \mathrm { Q } & \mathrm { R } \
\hline
\end{array}$$

Accepted Answer

A. $29,000; B. $0; C. 29,000; D. $11,600

Question 16

Complete:
 $$\begin{array} { | l | l | l | l | l | } 
\hline \text { Method } & & & & \
\text { Purchased } & \text { Cost } & \text { Recovery Class } & \text { Recovery Year } & \text { Cost Recovery } \
\hline \text { MACRS July 20 } & \$ 5,000 & 7 & 6 & \text { A } \
\hline \text { MACRS Nov 5 } & \$ 11,000 & 20 & 13 & \text { B } \
\hline
\end{array}$$

Accepted Answer

A. $446.50

Question 17

Match the following terms with their definitions.
-Units-of-production method

Accepted Answer

A) Residual value not deducted in calculation 
B) Even amount of depreciation expense each year 
C) Depreciation based on usage 
D) Depreciation that has been built up 
E) An allocation of the cost of an asset
F)Estimated life of asset
G)Cost minus accumulated depreciation
H)1 divided by number of years of expected life
I)A table showing depreciation allocation
J)Estimated value after AFIC depreciation taken
K)Result of Tax Reform Act of 1986
L)Salvage value 
A) Residual value not deducted in calculation 
B) Even amount of depreciation expense each year 
C) Depreciation based on usage 
D) Depreciation that has been built up 
E) An allocation of the cost of an asset
F)Estimated life of asset
G)Cost minus accumulated depreciation
H)1 divided by number of years of expected life
I)A table showing depreciation allocation
J)Estimated value after AFIC depreciation taken
K)Result of Tax Reform Act of 1986
L)Salvage value

Question 18

Match the following terms with their definitions.
-Straight-line rate

Accepted Answer

A) Residual value not deducted in calculation 
B) Even amount of depreciation expense each year 
C) Depreciation based on usage 
D) Depreciation that has been built up 
E) An allocation of the cost of an asset
F)Estimated life of asset
G)Cost minus accumulated depreciation
H)1 divided by number of years of expected life
I)A table showing depreciation allocation
J)Estimated value after AFIC depreciation taken
K)Result of Tax Reform Act of 1986
L)Salvage value 
A) Residual value not deducted in calculation 
B) Even amount of depreciation expense each year 
C) Depreciation based on usage 
D) Depreciation that has been built up 
E) An allocation of the cost of an asset
F)Estimated life of asset
G)Cost minus accumulated depreciation
H)1 divided by number of years of expected life
I)A table showing depreciation allocation
J)Estimated value after AFIC depreciation taken
K)Result of Tax Reform Act of 1986
L)Salvage value

Question 19

Match the following terms with their definitions.
-Depreciation

Accepted Answer

A) Residual value not deducted in calculation 
B) Even amount of depreciation expense each year 
C) Depreciation based on usage 
D) Depreciation that has been built up 
E) An allocation of the cost of an asset
F)Estimated life of asset
G)Cost minus accumulated depreciation
H)1 divided by number of years of expected life
I)A table showing depreciation allocation
J)Estimated value after AFIC depreciation taken
K)Result of Tax Reform Act of 1986
L)Salvage value 
A) Residual value not deducted in calculation 
B) Even amount of depreciation expense each year 
C) Depreciation based on usage 
D) Depreciation that has been built up 
E) An allocation of the cost of an asset
F)Estimated life of asset
G)Cost minus accumulated depreciation
H)1 divided by number of years of expected life
I)A table showing depreciation allocation
J)Estimated value after AFIC depreciation taken
K)Result of Tax Reform Act of 1986
L)Salvage value

Question 20

Johnson Company bought a light general purpose truck for $20,000. Calculate the yearly depreciation using MACRS (5-year class)for the first three years.

Accepted Answer

$4,000; $6

Exam 17: Depreciation

Physical deterioration is related to an asset's estimated amount of usefulness.

Find the Annual Recovery for Year 1. Method Purchased Cost Recovery Class Annual Recovery for Year 1 MACRS Nov 5 \ 12,000 3 A

Find the Annual Recovery for Year 1. Method Purchased Cost Recovery Class Annual Recovery for Year 1 MACRS July 8 \ 6,000 5 A

A truck costs $9,200 with a residual value of $1,000. It is estimated that the useful life of the truck is four years. The amount of depreciation expense in year 2 using the declining-balance method at twice the straight-line rate is:

A truck costs $35,000 with a residual value of $2,000. Its service life is five years. Using the declining-balance method at twice the straight-line rate, the book value at the end of year 2 is:

A non-luxury car will depreciate.

Jay Corp. bought a machine for $15,000. The machine is expected to produce 10,000 units. The machine has a residual value of $5,000. Assuming the machine produces 400 units during year 1, what should the depreciation expense be?

Land can be depreciated.

Cost minus residual divided by number of years equals depreciation expense taken each year in the straight-line method.

In the straight-line method, book value never goes below the residual value.

Match the following terms with their definitions. -Trade-in

Complete the following (use the straight-line method): Auto: $40,000; Residual: $4,000; Estimated Life: 5 Yrs Year Cost Depreciation Expense Accumulated Depreciation Book Value 1 2 3

Which one is not based on the passage of time?

Using the declining-balance method, complete the table as shown (twice the straight-line rate): Auto: $29,000; Residual: $2,000; Estimated Life: 5 Yrs Year Cost Accumulated Depreciation B.O.Y. Book Value B.O.Y Depreciation Expense Accumulated Depreciation E.O.Y. Book Value E.O.Y 1 A B C D E F 2 3

Complete: Method Purchased Cost Recovery Class Recovery Year Cost Recovery MACRS July 20 \ 5,000 7 6 A MACRS Nov 5 \ 11,000 20 13 B

Match the following terms with their definitions. -Units-of-production method

Match the following terms with their definitions. -Straight-line rate

Match the following terms with their definitions. -Depreciation

Johnson Company bought a light general purpose truck for $20,000. Calculate the yearly depreciation using MACRS (5-year class)for the first three years.

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