Question 1

The depreciation method which charges more expense in earlier years than in later years is the:

Accepted Answer

The double declining-balance method is an accelerated depreciation method that charges more expense in earlier years than in later years. The straight-line and units-of-production methods both allocate an equal amount of depreciation expense over the asset's useful life. Therefore, they do not meet the requirement of charging more expense in earlier years.

Question 2

J.Long purchased computer equipment for $7,000 on January 1,2015.It has a residual value of $700 with a useful life of 5 years.After the appropriate adjusting entry is made,the book value of the asset on December 31,2015,under the double declining-balance method,is:

Accepted Answer

The double declining-balance method involves depreciating the asset at twice the straight-line rate. The straight-line rate would be 1/5 or 20%. Double that and we get 40%. Therefore, the depreciation expense for 2015 would be $7,000 x 40% = $2,800. After the adjusting entry, the accumulated depreciation account would have a balance of $2,800. To find the book value, we subtract accumulated depreciation from the original cost: $7,000 - $2,800 = $4,200. Therefore, the book value of the asset on December 31, 2015, is $4,200.

Question 3

Rockwell Industries purchased a plant asset to be used in its business.The expenditures included:
 $$\begin{array} { l r } 
\text { Cost of machine } & \$ 10,000 \
\text { Special concrete base to support machine } & 400 \
\text { Freight charges } & 1,500 \
\text { Repair cost of damage incurred during installation } & 600
\end{array}$$ 
The Machine account will be debited for ________.

Accepted Answer

The answer of Rockwell Industries purchased a plant asset to...

Question 4

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

Accepted Answer

Double declining balance method results in higher depreciation expense compared to straight line method. Therefore, using double declining balance method instead of straight line method in the first year would result in understated net income for the period as higher expense is recognized. However, this does not affect period-end assets.

Question 5

What would be the depreciation expense using double declining-balance to compute the expense for year 2 of a machine costing $20,000,when residual value is $3,000,and useful life is 4 years?

Accepted Answer

The answer of What would be the depreciation expense using...

Question 6

In the last year of useful life,the salvage value was ignored using double declining-balance depreciation.This error would cause:

Accepted Answer

Ignoring the salvage value in the last year of useful life when using double declining-balance depreciation would result in over-depreciating the asset, leading to an understatement of the period end assets.

Question 7

Salvage value was ignored when originally calculating the units-of-production depreciation.This error would cause:

Accepted Answer

Ignoring salvage value when calculating units-of-production depreciation would result in a higher depreciation expense for the period. As a result, the period's net income would be understated since expenses are higher than they should be. Additionally, the period end assets would be understated since there is an overstatement of the depreciation expense.

Question 8

Jason Moore purchased computer equipment for $5,000 on January 1,2015.It has a residual value of $200 with a useful life of 6 years.After the appropriate adjusting entries have been made,the balance in Accumulated Depreciation account for this asset on January 1,2017,under the straight-line method,should be:

Accepted Answer

The annual depreciation expense is ($5,000 - $200) / 6 = $800. After two years (2015 and 2016), the accumulated depreciation is 2 * $800 = $1,600.

Question 9

The depreciation method that does not base the expense on the passage of time but on the level of use is:

Accepted Answer

The method that does not base the expense on the passage of time but on the level of use is the units-of-production method. It calculates depreciation based on the number of units produced or the hours of operation, rather than a fixed time period.

Question 10

Assuming a useful life of five years,which of the following GAAP methods would most likely result in the most depreciation in the first year?

Accepted Answer

Double declining-balance method accelerates depreciation in the early years, resulting in higher depreciation expense in the first year compared to straight-line and MACRS methods.

Question 11

Which depreciation method deducts residual value when computing depreciation expense?

Accepted Answer

The answer of Which depreciation method deducts residual value when...

Question 12

The depreciation method in which an even amount of depreciation expense is taken each year is called:

Accepted Answer

The straight-line method is the only option given that fits the description of an even amount of depreciation expense taken each year. The double declining-balance method results in a higher amount of depreciation expense in the earlier years and lower amounts in later years, while the units-of-production method varies based on the level of production. Therefore, only choice A is correct.

Question 13

Lacy purchased equipment for $76,000 on January 1.Its residual value is $4,000 with a useful life of 8 years.The amount of depreciation expense in the first year under the straight-line method is:

Accepted Answer

The straight-line method of depreciation is calculated by subtracting the residual value from the cost and then dividing by the useful life. ($76,000 - $4,000) / 8 = $9,000.

Question 14

Which depreciation method uses twice the straight-line rate?

Accepted Answer

Double declining-balance uses twice the straight-line rate for depreciation.

Question 15

Which depreciation method does NOT use the current book value in calculating depreciation expense?

Accepted Answer

The straight-line and units-of-production methods do not use the current book value in calculating depreciation expense. The straight-line method calculates depreciation based on the initial cost minus salvage value over the useful life, while the units-of-production method bases depreciation on the number of units produced or hours used during the period.

Question 16

What would the depreciation expense be in year 5 for a computer system using the straight-line method when cost is $16,000,residual value is $2,000,and the expected life is 7 years?

Accepted Answer

The answer of What would the depreciation expense be in...

Question 17

The book value of an asset is calculated by taking the:

Accepted Answer

The book value of an asset is the cost of the asset less its accumulated depreciation. This means that it is the original cost of the asset minus the total amount of depreciation that has been recorded since its acquisition. Choice A is incorrect because it uses the market value, which is not necessarily the same as the original cost. Choices C and D are also incorrect because they use the residual or salvage value, which may not be relevant depending on the context.

Question 18

The cost of equipment is expensed:

Accepted Answer

The cost of equipment is expensed over the periods that benefit the company. This is done through depreciation accounting, which spreads the cost of the equipment over its useful life. This allows the company to match the cost of using the equipment with the revenue it generates over time. This is in line with the matching principle of accounting, which requires expenses to be recognized in the same period as the revenue they help to generate.

Question 19

When calculating declining balance depreciation,the straight-line rate was used instead of double the straight-line rate.In the first year of ownership,this error would cause:

Accepted Answer

Using the straight-line rate instead of double the straight-line rate results in lower depreciation expense in the first year, causing the period end assets to be overstated.

Question 20

Josh Kindel purchased equipment for $50,000 on January 1.Its residual value is $5,000 with a useful life of 10 years.The amount of depreciation expense in the first year under the double declining-balance method is:

Accepted Answer

Under the double declining-balance method, the depreciation rate is twice the straight-line rate.

Straight-line rate = 1 / useful life = 1/10 = 0.1 or 10%

Double declining-balance rate = 2 * straight-line rate = 2 * 10% = 20%

Depreciation expense for year 1 = Beginning book value * depreciation rate

Beginning book value = Cost - Accumulated depreciation = $50,000 - $0 = $50,000

Depreciation rate = 20%

Depreciation expense for year 1 = $50,000 * 20% = $10,000

Therefore, the correct answer is B) $10,000.

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