Question 1

What would be the accumulated depreciation at the end of year 6 for a piece of equipment using the straight-line method when the cost is $11,000,residual value is $1,000,and the expected life is 10 years?

Accepted Answer

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Question 2

For tax purposes,________ establishes the guidelines and the percentages for depreciation.

Accepted Answer

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Question 3

Talarico's Subs purchased a new van for $28,000,its estimated useful life at 100,000 miles,residual value of $4,000.The van was driven 12,000 miles in year 1.What is the depreciation expense in year 1?

Accepted Answer

Depreciation expense = (Cost - Residual value) / Useful life= (28,000 - 4,000) / 100,000= 24,000 / 100,000= 0.24= 0.24 * 12,000= $2,880

Question 4

What would be the depreciation expense in year 1,using units-of-production,for a molding machine that cost $22,000,had a useful life of 7 years,and an estimated total machine hours of 40,000? The salvage value is $2,000 and production in year 1 was 8,000 hours.

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Question 5

The double declining-balance method is an accelerated depreciation method.

Accepted Answer

The double declining-balance method is an accelerated depreciation method where a higher rate of depreciation is charged in the early years of an asset's life, and the rate decreases as the years go by. This results in more depreciation being charged in the early years, which reflects the fact that assets generally lose value more quickly early in their life.

Question 6

Under MACRS,furniture is depreciated over seven years.

Accepted Answer

Under MACRS, furniture is classified as a 7-year property and is depreciated over 7 years.

Question 7

Double declining-balance method is used in the first year when straight-line should be used.This error would cause:

Accepted Answer

The double declining-balance method results in higher depreciation expenses in the earlier periods of the asset's life. This means that if it is used when straight-line should be used, the period's net income will be understated as the higher depreciation expenses will be recorded as an expense in those periods.

Question 8

A depreciation method that allocates depreciation of a plant asset based on the Tax Act of 1989 is the:

Accepted Answer

The modified accelerated cost recovery method (MACRS) is a depreciation method that allocates the cost of an asset over its useful life according to a depreciation schedule that is defined by the Tax Act of 1989. The MACRS is commonly used for tax purposes and allows for faster depreciation in the early years of an asset's life, which can result in lower taxable income. Therefore, choice C is the best option.

Question 9

Using MACRS rates for a 15 and 20-year property,what is the percentage for the depreciable rate?

Accepted Answer

The Modified Accelerated Cost Recovery System (MACRS) uses a 150 percent declining balance method for 15 and 20-year property, which allows for a faster depreciation rate initially that slows down over time.

Question 10

The units-of-production method does not take into account the passage of time.

Accepted Answer

The units-of-production method of depreciation is based on the output or usage of the asset, rather than the passage of time.

Question 11

Net income is not affected by the depreciation method used.

Accepted Answer

Net income is affected by the depreciation method used because different methods allocate different amounts of depreciation expense to each period, which impacts the amount of net income reported.

Question 12

Under MACRS,which of the following classes uses the straight-line method?

Accepted Answer

Under MACRS, the 24.5-year property class uses the straight-line method for depreciation.

Question 13

What would the book value be at the end of year 6 for a piece of equipment using the straight-line method when cost is $11,000,residual value is $1,000,and the expected life is 10 years?

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Question 14

To calculate the double declining-balance rate,you would use half the straight line rate.

Accepted Answer

The double declining-balance rate is actually twice the straight-line rate, not half.

Question 15

For tax purposes,equipment is depreciated using the straight-line method under MACRS.

Accepted Answer

MACRS (Modified Accelerated Cost Recovery System) does not use the straight-line method for depreciation; instead, it allows for accelerated depreciation over an asset's useful life.

Question 16

A plant asset is fully depreciated when the book value is:

Accepted Answer

A fully depreciated asset is one whose accumulated depreciation equals the cost of the asset. At this point, the book value of the asset (cost minus accumulated depreciation) will be equal to the salvage value. Therefore, the correct choice is C, equal to the salvage value.

Question 17

A tractor costing $180,000 is depreciated using MACRS.The tractor qualifies as a 3-year property,and has a scrap value of $20,000.The depreciation rates are:
$$\begin{array} { | l | l | } 
\hline \text { Year 1: } & 33.00 \% \
\hline \text { Year 2: } & 45.00 \% \
\hline \text { Year 3: } & 15.00 \% \
\hline \text { Year 4: } & 7.00 \% \
\hline
\end{array}$$
What is the depreciation expense for year 3?

Accepted Answer

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Question 18

The depreciation method that ignores the salvage value is ________.

Accepted Answer

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Question 19

What would be the depreciation expense in year 1,using units-of-production,for a molding machine that cost $15,000,had a useful life of 5 years,no residual value,and an estimated total machine hours of 50,000? Production in year 1 was 10,000 hours.

Accepted Answer

Depreciation expense = (Cost - Residual value) x (Actual machine hours / Estimated total machine hours)= (15,000 - 0) x (10,000 / 50,000)= 15,000 x 0.2= $3,000

Question 20

According to the MACRS tax rate table,the following classes do NOT use straight-line depreciation:

Accepted Answer

Automobiles use accelerated depreciation methods, such as the double-declining balance method, under the MACRS tax rate table. Residential rental property and nonresidential real property both use straight-line depreciation.

Quiz 16: Accounting for Property,plant,equipment,and Intangible Assets