Question 1

On January 1,2014,CK purchased a machine that had a list price of $22,980.CK paid cash of $10,000 and executed a one-year non-interest-bearing note for the $12,980 balance.The going rate of interest was 18 percent.Assume straight-line amortization with an estimated useful life of six years and a $1,200 estimated residual value.Amortization expense for the accounting year ending December 31,2014,would be $___________________.

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Question 2

On January 1,2014,the Rose Company purchased a machine costing $100,000.The machine is a Class 8 asset for tax purposes with a CCA rate of 20%.It has an estimated $20,000 residual value at the end of its economic life.Assuming the company uses the capital cost allowance method; calculate the amount of CCA deduction for tax purposes for the year 2014.Rose Company has a calendar year-end and adjusting entries are only made at year-end.

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Question 3

An asset cost $13,000; estimated residual value,$1,000,and estimated life: -In years................. 5
-In running time (hours)... 3,000 Actual in Year 1- 700 hours
-In productive output (units) 10,000 Actual in Year 1-2,000 units Compute the following: $$\begin{array} { l l l } 
& \text { Amortization } & \text { Carrying Value } \
\hline \text { Method } & \text { Expense-Year 1 } & \text { End of Year 1 }
\end{array}$$ (a) Straight-line
(b) Service hours
(c) Productive output
(d) SYD
(e) Double declining
Balance

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Question 4

On April 13,2014,Halifax Co.purchased machinery for $150,000.Residual value was estimated to be $6,000.The machinery will be amortized over 10 years using the double-declining balance method.If amortization is computed on the basis of the nearest full month,calculate the amount Halifax should record amortization expense for 2015 on this machinery.Halifax Co.has a December 31 year-end and adjusting entries are only made at year-end.

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Question 5

The appraisal (inventory),retirement,replacement and composite amortization methods offer significant accounting cost savings over individually applied methods.Discuss how these methods help to save accounting costs.

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Question 6

Calculate amortization for the first year (to the nearest dollar) for a capital asset which cost $11,500,has a $500 residual value,and a 10-year estimated life under each of the amortization methods listed below.
(a) Straight-line $_____________________.
(b) Sum-of-the-years'-digits $_____________________.
(c) Declining balance $_________________.
(d) Productive output (where total potential output is 1,250 units and output for the year is 200 units) $_________________.

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Question 7

On January 3,2014,Garcia Co.purchased machinery.The machinery has an estimated useful life of eight years and an estimated residual value of $25,000.The amortization applicable to this machinery was $54,000 for 2015,computed by the straight-line method.Calculate what the acquisition cost of the machinery was.

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Question 8

On January 2,2007,Jones & Smith Limited acquired equipment to be used in its manufacturing operations.The equipment has an estimated useful life of 10 years,an estimated residual value of $15,000,and was expected to be used 38,000 hours.The amortization applicable to this equipment was $63,075 for 2000,computed under the activity method after the machine was used 4,350 hours.Calculate the acquisition cost of the equipment.

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Question 9

Wolf Co.purchased machinery that was installed and ready for use on January 3,2014,at a total cost of $92,000.Residual value was estimated at $12,000.The machinery will be amortized over five years using the double-declining balance method.Calculate for the year 2015,the amount Wolf should record amortization expense on this machinery.Wolf Co.has a December 31 year-end and adjusting entries are only made at year-end.

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Question 10

On January 1,2014,REP replaced a major component in Plant A,which had been operating for 10 years (from construction date of the plant); its original cost as a part of the plant was $36,000.The replacement component cost $40,000 (cash) and has an estimated life of 25 years.Plant A is depreciated as one unit on the straight-line basis (not group or composite amortization system) and has an estimated life of 30 years (total).All residual values were zero.REP has a December 31 year-end and only accounts for amortization at year-end.
(a) Give the entry (entries) on January 1,2014.
(b) At the end of 2014,what amount of amortization should be recorded on the replacement item? $____________________.

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Question 11

During 2014,King Co.sold equipment that had cost $82,000 for $49,200.This resulted in a gain of $4,300.The balance in Accumulated Amortization--Equipment was $270,000 on January 1,2014,and $258,000 on December 31.No other equipment was disposed of during 2014.Calculate the amount of amortization expense for 2014.King Co.has a calendar year-end and adjusting entries are only made at year-end.

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Question 12

At the end of the annual reporting period,December 31,2014,LTX had the accounting situation given below under consideration for adjusting entries.Give the appropriate adjusting entry.Assume straight-line amortization.If an adjusting entry is not needed,explain why.
Situation: LTX had a small (and old) plant that has been idle for two years.LTX has been unable to sell it for the asking price of $75,000.It originally cost $325,000 and the accumulated depreciation is $265,000.A recent independent appraisal of its current value (the land plus salvage value of the plant) was $35,000.

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Question 13

On January 1,2014,the Accumulated Amortization--Machinery account of a particular company showed a balance of $308,000.At the end of 2014,after the adjusting entries were posted,it showed a balance of $330,000.During 2014,one of the machines,which cost $103,400,was sold for $60,500 cash.This resulted in a loss of $3,300.Assuming that no other assets were disposed of during the year,calculate the amount of amortization expense for 2014.Assume a December 31 year-end and adjusting entries are only made at year-end.

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Question 14

RJB acquired an asset,which cost $12,000 on January 1,2001,the estimated useful life was 6 years and residual value was $1,500.RJB has a December 31 year-end and adjusting entries are only made at year-end.
(a) Assume the retirement system is used and that shortly before the end of an asset's expected life,a replacement was purchased at a cost of $13,000.The $1,500 residual value proved to be correct.Under these conditions the amount of amortization expense recorded would have been: (1) for the first year of the original life,$________________; 2) for the last year of the original life,$____________________.
(b) Assume the same facts as in (a),except that the replacement system was used.Under these conditions,the amount of amortization expense recorded would have been: (1) for the first year of the original life,$________________; 2) for the last year of the original life,$____________________.
(c) Assume instead that the SYD method was used; amortization expense for the second year on the asset would be: $__________________.
(d) Assume instead that the DDB method was used; amortization expense for the second year on the asset would be: $_______________________.

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Question 15

An asset cost $93,000 (no residual value) and is being depreciated on the SYD basis over 30 years.What is the amount of amortization expense for years:
(1)__________________ (10)_______________ (30)________________?

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Question 16

Yvon Co.,which has a calendar year accounting period,purchased a new machine for $30,000 on April 1,2013.At that time Yvon expected to use the machine for nine years and then sell it for $3,000.The machine was sold for $16,500 on September 30,2018.Assume the use of straight-line amortization,no amortization in the year of acquisition,and a full year of amortization in the year of retirement.Calculate the gain to be recognized at the time of sale.

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Question 17

The Harvey Co.purchased a tooling machine on January 3,2011 for $420,000.The machine was being amortized on the straight-line method over an estimated useful life of 10 years,with no residual value.At the beginning of 2018,the company paid $105,000 to overhaul the machine.As a result of this improvement,the company estimated that the useful life of the machine would be extended an additional five years (15 years total).Calculate the amount of the amortization expense to be recorded for the machine in 2018.Harvey Co.has a calendar year-end and adjusting entries are only made at year-end.

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Question 18

Lone Co.purchased a machine on July 1,2018,for $600,000.The machine has an estimated useful life of five years and a residual value of $80,000.The machine is being amortized from the date of acquisition by the 150% declining balance method.Calculate for the year ended December 31,2018,the amount that Lone should record for amortization expense on this machine.

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Question 19

Mossman Co.purchased machinery on January 2,2012,for $360,000.The straight-line method is used and useful life is estimated to be 10 years,with a $40,000 residual value.At the beginning of 2018 Mossman spent $96,000 to overhaul the machinery.After the overhaul,Mossman estimated that the useful life would be extended four years (14 years total),and the residual value would be $30,000.Calculate the amortization expense for 2018.Mossman Co.has a December 31 year-end and adjusting entries are only made at year-end.

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Question 20

(a) While studying a firm's income statement,you notice the line item: Amortization expense$\quad\quad\quad\$ 400,000$ Write a short report to a client of yours who is interested in providing a loan to this firm.In other words,what does the $400,000 amount mean,and perhaps more importantly,what does it not imply?
(b) Also,you come across the following line item: Impairment loss, property$\quad\quad\$ 600,000$ What does this amount represent,when is it recognized,what may have caused it,and how does it affect subsequent amortization,assuming that the property is not a total loss?

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Quiz 10: Depreciation,Amortization,and Impairment

The appraisal (inventory),retirement,replacement and composite amortization methods offer significant accounting cost savings over individually applied methods.Discuss how these methods help to save accounting costs.

An asset cost $93,000 (no residual value) and is being depreciated on the SYD basis over 30 years.What is the amount of amortization expense for years: (1)__________ (10)_ (30)__________?

Quiz 10: Depreciation,Amortization,and Impairment

The appraisal (inventory),retirement,replacement and composite amortization methods offer significant accounting cost savings over individually applied methods.Discuss how these methods help to save accounting costs.

An asset cost $93,000 (no residual value) and is being depreciated on the SYD basis over 30 years.What is the amount of amortization expense for years: (1)__________________ (10)_______________ (30)________________?

An asset cost $93,000 (no residual value) and is being depreciated on the SYD basis over 30 years.What is the amount of amortization expense for years: (1)__________ (10)_ (30)__________?