Question 1

Briefly explain the disclosures that are required relative to depreciable assets.

Accepted Answer

The note presenting the summary of signi

Question 2

A change in the estimated recoverable units used to compute depletion requires retroactive adjustments to the financial statements.

Accepted Answer

A) True 
 B)False

Question 3

Using the sum-of-the years'-digits method, depreciation for 2010 and book value at December 31, 2010, would be

Accepted Answer

A) $13,500 and $13,500. 
B) $13,500 and $8,500. 
C) $12,000 and $17,000. 
D) $12,000 and $12,000.Depreciation in 2010 = ($45,000 5,000) 3/10 = $12,000 Book value, 12/31/10 = $45,000 16,000 12,000 = $17,000 
A) $13,500 and $13,500. 
B) $13,500 and $8,500. 
C) $12,000 and $17,000. 
D) $12,000 and $12,000.Depreciation in 2010 = ($45,000 5,000) 3/10 = $12,000 Book value, 12/31/10 = $45,000 16,000 12,000 = $17,000

Question 4

Depreciation:

Accepted Answer

A) Is always considered a period cost. 
B) Could be a product cost or a period cost depending on the use of the asset. 
C) Is usually based on the declining-balance method. 
D) Per books is usually higher than MACRS in the early years of an asset's life. 
A) Is always considered a period cost. 
B) Could be a product cost or a period cost depending on the use of the asset. 
C) Is usually based on the declining-balance method. 
D) Per books is usually higher than MACRS in the early years of an asset's life.

Question 5

Gonzaga Company has used the double-declining-balance method for depreciation since it started business in 2005. At the beginning of 2009, the company decided to change to the straight-line method. Depreciation as reported and what it would have been reported if the company had always used straight-line is listed below:
Required:
What journal entry, if any, should Gonzaga make to record the effect of the accounting change (ignore income taxes)? Explain.
 $\begin{array}{rrr}\text { Year }& \text { Straight-Line } & \text { DDB } \
2005 & \$ 32,000 & \$ 55,000 \
2006 & 35,000 & 50,000 \
2007 & 39,000 & 58,000 \
2008 & 39,000 & 48,000
\end{array}$

Accepted Answer

The change in depreciation method is tre

Question 6

On September 30, 2009, Sternberg Company sold office equipment for $12,000. The equipment was purchased on March 31, 2006, for $24,000. The asset was being depreciated over a five-year life using the straight-line method, with depreciation based on months in service. No residual value was anticipated.
Required:
Prepare the journal entries to record 2009 depreciation and the sale of the equipment.

Accepted Answer

The answer of On September 30, 2009, Sternberg Company sold...

Question 7

On February 20, 2009, Genoa Mining Company incurred costs of $3,600,000 to acquire and prepare to extract an estimated 4,000,000 tons of mineral deposits. 450,000 tons of ore were mined in 2009. At the beginning of 2010, Genoa geologists estimated that 3,900,000 tons of ore still remained. 700,000 tons of ore were mined in 2010.
Required:
Compute depletion for 2009 and 2010.

Accepted Answer

The answer of On February 20, 2009, Genoa Mining Company...

Question 8

Eckland Manufacturing Co. purchased equipment on January 1, 2007, at a cost of $90,000. Depreciation for 2007 and 2008 was based on an estimated eight-year life and $2,000 estimated residual value. In 2009, Eckland revised its estimate and now believes the equipment will have a total service life of only six years, while the residual value remains the same.
Required:
Compute depreciation for 2009 and 2010.

Accepted Answer

The answer of Eckland Manufacturing Co. purchased equipment on January...

Question 9

Accounting for impairment losses:

Accepted Answer

A) Involves a two-step process for recoverability and measurement. 
B) Applies only to depreciable, operational assets. 
C) Applies only to assets with finite lives. 
D) All of these are correct. 
A) Involves a two-step process for recoverability and measurement. 
B) Applies only to depreciable, operational assets. 
C) Applies only to assets with finite lives. 
D) All of these are correct.

Question 10

Using the double-declining balance method, depreciation for 2009 and book value at December 31, 2009, would be:

Accepted Answer

A) $22,500 and $22,500. 
B) $22,500 and $17,500. 
C) $20,000 and $25,000. 
D) $20,000 and $20,000.Depreciation in 2009 = $45,000 50% = $22,500 Book value, 12/31/09 = $45,000 22,500 = $22,500 
A) $22,500 and $22,500. 
B) $22,500 and $17,500. 
C) $20,000 and $25,000. 
D) $20,000 and $20,000.Depreciation in 2009 = $45,000 50% = $22,500 Book value, 12/31/09 = $45,000 22,500 = $22,500

Question 11

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

Accepted Answer

Straight-line rate =

Question 12

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

Accepted Answer

Straight-line rate =

Question 13

The physical life of a depreciable asset sets the lower limit of its service life.

Accepted Answer

A) True 
 B)False

Question 14

Activity-based methods of depreciation are appropriate for assets whose service life is a function of use rather than time.

Accepted Answer

A) True 
 B)False

Question 15

The factors that need to be determined to compute depreciation are an asset's:

Accepted Answer

A) Cost, residual value, and physical life. 
B) Cost, replacement value, and service life. 
C) Fair value, residual value, and economic life. 
D) Cost, residual value, and service life. 
A) Cost, residual value, and physical life. 
B) Cost, replacement value, and service life. 
C) Fair value, residual value, and economic life. 
D) Cost, residual value, and service life.

Question 16

In testing for recoverability of an operational asset, an impairment loss is required if the:

Accepted Answer

A) Asset's book value exceeds the undiscounted sum of expected future cash flows. 
B) Undiscounted sum of its expected future cash flows exceeds the asset's book value. 
C) Present value of expected future cash flows exceeds its book value. 
D) None of these. 
A) Asset's book value exceeds the undiscounted sum of expected future cash flows. 
B) Undiscounted sum of its expected future cash flows exceeds the asset's book value. 
C) Present value of expected future cash flows exceeds its book value. 
D) None of these.

Question 17

In its 2007 annual report to shareholders, Martin Marietta Materials, Inc. included the following in its financial statement footnotes:
NOTE F: PROPERTY, PLANT AND EQUIPMENT, NET
Finally, the company stated the following among its accounting policies: "Depletion of mineral deposits is calculated over proven and probable reserves by the units-of-production method."
Required:
Compute the percentage of proven and probable reserves of mineral deposits depleted in 2007.

Accepted Answer

Based on ending bala

Question 18

MACRS (Modified accelerated cost recovery system) depreciation is equivalent to sum-of-the-years' digits depreciation.

Accepted Answer

A) True 
 B)False

Question 19

Depreciation (to the nearest dollar) for 2010, using sum-of-the-years' digits, would be:

Accepted Answer

A) $31,909. 
B) $29,455. 
C) $35,456. 
D) $18,000.($200,000 20,000) 10/55 9/12 + ($200,000 20,000) 9/55 3/12 = $31,909 
A) $31,909. 
B) $29,455. 
C) $35,456. 
D) $18,000.($200,000 20,000) 10/55 9/12 + ($200,000 20,000) 9/55 3/12 = $31,909

Question 20

Briefly explain how a change in depreciation method is accounted for.

Accepted Answer

A change in depreciation method is treat

Briefly explain the disclosures that are required relative to depreciable assets.

A change in the estimated recoverable units used to compute depletion requires retroactive adjustments to the financial statements.

Using the sum-of-the years'-digits method, depreciation for 2010 and book value at December 31, 2010, would be

Depreciation:

Accounting for impairment losses:

Using the double-declining balance method, depreciation for 2009 and book value at December 31, 2009, would be:

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

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

The physical life of a depreciable asset sets the lower limit of its service life.

Activity-based methods of depreciation are appropriate for assets whose service life is a function of use rather than time.

The factors that need to be determined to compute depreciation are an asset's:

In testing for recoverability of an operational asset, an impairment loss is required if the:

MACRS (Modified accelerated cost recovery system) depreciation is equivalent to sum-of-the-years' digits depreciation.

Depreciation (to the nearest dollar) for 2010, using sum-of-the-years' digits, would be:

Briefly explain how a change in depreciation method is accounted for.

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement and Statement of Cash Flows

Income Measurement

Time Value of Money Concepts

Cash and Receivables

Inventories: Measurement

Inventories: Additional Issues

Operational Assets: Acquisition and Disposition

Investments

Current Liabilities and Contingencies

Bonds and Long-Term Notes

Leases

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity

Share-Based Compensation and Earnings Per Share

Accounting Changes

The Statement of Cash Flows

Appendix a Derivatives

Filters

Exam 11: Operational Assets: Utilization and Impairment

Briefly explain the disclosures that are required relative to depreciable assets.

A change in the estimated recoverable units used to compute depletion requires retroactive adjustments to the financial statements.

Using the sum-of-the years'-digits method, depreciation for 2010 and book value at December 31, 2010, would be

Depreciation:

Accounting for impairment losses:

Using the double-declining balance method, depreciation for 2009 and book value at December 31, 2009, would be:

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

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

The physical life of a depreciable asset sets the lower limit of its service life.

Activity-based methods of depreciation are appropriate for assets whose service life is a function of use rather than time.

The factors that need to be determined to compute depreciation are an asset's:

In testing for recoverability of an operational asset, an impairment loss is required if the:

MACRS (Modified accelerated cost recovery system) depreciation is equivalent to sum-of-the-years' digits depreciation.

Depreciation (to the nearest dollar) for 2010, using sum-of-the-years' digits, would be:

Briefly explain how a change in depreciation method is accounted for.

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement and Statement of Cash Flows

Income Measurement

Time Value of Money Concepts

Cash and Receivables

Inventories: Measurement

Inventories: Additional Issues

Operational Assets: Acquisition and Disposition

Investments

Current Liabilities and Contingencies

Bonds and Long-Term Notes

Leases

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity

Share-Based Compensation and Earnings Per Share

Accounting Changes

The Statement of Cash Flows

Appendix a Derivatives

Filters