Question 1

On October 1, 2021, Marshwinds Wind Turbine Company places a new asset into service. The cost of the asset is $ 8,000 with an estimated 5-year life and $ 2,000 residual value at the end of its useful life. What is the depreciation expense for 2021 if Marshwinds Wind Turbine Company uses the straight-line method of depreciation?
A) $ 300
B) $ 1,600
C) $ 400
D) $ 800

Accepted Answer

Depreciation expense = (Cost of asset - Residual value) / Useful life= (8,000 - 2,000) / 5= $ 1,200Depreciation expense for 2021 = 1,200 / 2= $ 600

Question 2

Dorchester Company purchased a new van for floral deliveries on July 1, 2021. The van cost $ 20,000 with an estimated life of 5 years and $ 5,000 residual value at the end of its useful life. The double diminishing-balance method of depreciation will be used. What is the depreciation expense for 2021?
A) $ 4,000
B) $ 3,000
C) $ 6,000
D) $ 8,000

Accepted Answer

The double diminishing-balance method of depreciation results in a depreciation expense of 40% of the book value in the first year. The book value in the first year is $20,000, so the depreciation expense for 2021 is $20,000 x 40% = $8,000.

Question 3

The diminishing-balance method of depreciation produces a(n)
A) decreasing depreciation expense each period.
B) increasing depreciation expense each period.
C) decreasing percentage rate each period.
D) constant amount of depreciation expense each period.

Accepted Answer

The diminishing-balance method of depreciation results in a decreasing depreciation expense each period as a fixed percentage is applied to the remaining balance of the asset, which decreases with each period.

Question 4

Bay of Fundy Company uses the units-of-production method in calculating depreciation. A new piece of equipment is purchased for $ 18,000 that will produce an estimated 100,000 units over its useful life. Estimated residual value at the end of its useful life is $ 2,000. What is the depreciable cost per unit?
A) $ 1.60
B) $ 1.80
C) $ 0.16
D) $ 0.18

Accepted Answer

The answer of Bay of Fundy Company uses the units-of-production...

Question 5

A long-lived asset cost $ 24,000 and is estimated to have a $ 3,000 residual value at the end of its 8-year useful life. The annual depreciation expense recorded for the third year using the double diminishing-balance method would be
A) $ 2,010.
B) $ 3,375.
C) $ 2,953.
D) $ 2,297.

Accepted Answer

The double declining balance method accelerates depreciation, applying a constant rate to the declining book value of the asset each year. To calculate the depreciation expense for the third year, follow these steps:1. Determine the depreciation rate. Since the useful life is 8 years, the straight-line depreciation rate is 1/8, or 12.5%. For the double declining balance method, double this rate: 12.5% * 2 = 25%.2. Calculate depreciation for the first year: $24,000 * 25% = $6,000.3. Subtract the first year's depreciation from the cost to find the book value at the beginning of the second year: $24,000 - $6,000 = $18,000.4. Calculate the second year's depreciation: $18,000 * 25% = $4,500.5. Subtract the second year's depreciation from the book value at the beginning of the second year to find the book value at the beginning of the third year: $18,000 - $4,500 = $13,500.6. Calculate the third year's depreciation: $13,500 * 25% = $3,375.Therefore, the correct answer is B) $3,375.

Question 6

The calculation of depreciation using the diminishing-balance method
A) ignores residual value in determining the amount to which a constant rate is applied.
B) multiplies a constant percentage times the previous year's depreciation expense.
C) yields an increasing depreciation expense each period. d. multiplies a diminishing percentage times a constant carrying amount.

Accepted Answer

The answer of The calculation of depreciation using the diminishing-balance...

Question 7

A company purchased factory equipment on June 1, 2021 for $ 48,000. It is estimated that the equipment will have a $ 6,000 residual value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2021 is
A) $ 4,800.
B) $ 4,200.
C) $ 2,450.
D) $ 6,000.

Accepted Answer

The answer of A company purchased factory equipment on June...

Question 8

On October 1, 2021, Marshwinds Wind Turbine Company places a new asset into service. The cost of the asset is $ 8,000 with an estimated 5-year life and $ 2,000 residual value at the end of its useful life. What is the carrying amount of the long-lived asset on the December 31, 2021, balance sheet assuming that Marshwinds Wind Turbine Company uses the double diminishing-balance method of depreciation?
A) $ 5,200
B) $ 6,000
C) $ 7,200
D) $ 7,600

Accepted Answer

The double diminishing-balance method calculates depreciation by applying a constant rate to the declining book value of the asset. The rate is double the straight-line rate. For a 5-year life, the straight-line rate is 20%, so the double rate is 40%. Depreciation for 3 months (October to December) is calculated as $8,000 * 40% * (3/12) = $800. The carrying amount is $8,000 - $800 = $7,200.

Question 9

Lois Ltd. purchased equipment for $ 30,000 on January 1, 2019, and will use the diminishing-balance method of depreciation. It is estimated that the equipment will have a 3-year life and a $ 3,000 residual value at the end of its useful life. The amount of depreciation expense recognized in the year 2021 will be
A) $ 6,000.
B) $ 4,444.
C) $ 4,800.
D) $ 2,400.

Accepted Answer

The answer of Lois Ltd. purchased equipment for $ 30,000...

Question 10

Dorchester Company purchased a new van for floral deliveries on July 1, 2021. The van cost $ 20,000 with an estimated life of 5 years and $ 5,000 residual value at the end of its useful life. The double diminishing-balance method of depreciation will be used. What is the balance of the accumulated depreciation account at the end of 2022?
A) $ 4,800
B) $ 6,400
C) $ 10,400
D) $ 4,000

Accepted Answer

The double diminishing-balance method calculates depreciation by doubling the straight-line rate. The straight-line rate is 1/5 = 20%, so the double rate is 40%. For 2021, depreciation is $20,000 * 40% * 1/2 = $4,000. For 2022, depreciation is ($20,000 - $4,000) * 40% = $6,400. Accumulated depreciation at the end of 2022 is $4,000 + $6,400 = $10,400.

Question 11

A company purchased a delivery truck for $ 60,000. It is estimated that the truck will have a $ 10,000 residual value at the end of its estimated 5-year useful life. If the company uses the double diminishing-balance method of depreciation, the amount of annual depreciation recorded for the second year after purchase would be
A) $ 9,600.
B) $ 24,000.
C) $ 14,400.
D) $ 12,000.

Accepted Answer

Using the double diminishing-balance method, we apply a depreciation rate of 2/n (where n is the estimated useful life) to the book value of the asset at the beginning of each year.

In this case, the depreciation rate is 2/5 = 0.4.

At the end of year 1, the book value of the asset is $60,000 - depreciation expense for year 1. Using the double diminishing-balance method, we have:

Depreciation expense for year 1 = $60,000 x 0.4 = $24,000 
Book value at the end of year 1 = $60,000 - $24,000 = $36,000

At the end of year 2, the book value of the asset is $36,000 - depreciation expense for year 2. Using the double diminishing-balance method, we have:

Depreciation expense for year 2 = $36,000 x 0.4 = $14,400

Therefore, the amount of annual depreciation recorded for the second year after purchase is $14,400.

Question 12

Units-of-production is an appropriate depreciation method to use when
A) it is impossible to determine the productivity of the asset.
B) the asset's use will be constant over its useful life.
C) the productivity of the asset varies significantly from one period to another.
D) the company is a manufacturing company.

Accepted Answer

Units-of-production depreciation method is best suited when the productivity of an asset varies significantly from one period to another. This method allocates the cost of the asset over its useful life based on the number of units it produces. It is particularly useful for assets that are not used evenly throughout their lives, such as equipment that is heavily used in the early years and then gradually phased out.

Question 13

Which depreciation method is most frequently used in businesses today?
A) straight-line
B) diminishing-balance
C) units-of-production
D) revaluation

Accepted Answer

The straight-line method is the most commonly used depreciation method because it is simple to apply and provides a consistent expense amount over the useful life of an asset.

Question 14

Under International Financial Reporting Standards, the models which companies can choose to account for their long-lived assets are
A) cost model and units-of-production model.
B) units-of-production model and diminishing-balance model.
C) revaluation model and straight-line model.
D) cost model and revaluation model.

Accepted Answer

Under International Financial Reporting Standards, the two models that companies can choose to account for their long-lived assets are the cost model and the revaluation model. The cost model involves reporting the asset at its historical cost, less any accumulated depreciation, while the revaluation model allows the asset to be revalued to its fair value at the end of each reporting period. Therefore, the best choice is D, as it includes both the cost model and revaluation model.

Question 15

A company purchased office equipment for $ 10,000 and estimated a residual value of $ 2,000 at the end of its 4-year useful life. The constant percentage to be applied against carrying amount each year if the double diminishing-balance method is used is
A) 20%.
B) 25%.
C) 50%.
D) 4%.

Accepted Answer

The answer of A company purchased office equipment for $...

Question 16

Management should select the depreciation method that
A) is easiest to apply.
B) best measures the long-lived asset's fair value over its useful life.
C) best measures the long-lived asset's contribution to revenue over its useful life.
D) has been used most often in the past by the company.

Accepted Answer

The correct depreciation method should best measure the long-lived asset's contribution to revenue over its useful life, as this approach aligns the expense recognition with the revenue generated, adhering to the matching principle in accounting.

Question 17

Which of the following methods of calculating depreciation uses measures other than time?
A) straight-line
B) diminishing-balance
C) units-of-production
D) none of these

Accepted Answer

The units-of-production method calculates depreciation based on the actual usage or production level of the asset, rather than the passage of time.

Question 18

A factory machine was purchased for $ 20,000 on March 1, 2021. It was estimated that it would have a $ 4,000 residual value at the end of its 5-year useful life. It was also estimated that the machine would be run 25,000 hours in the 5 years. If the actual number of machine hours run in 2021 was 4,000 hours and the company uses the units-of-production method of depreciation, the amount of depreciation expense for 2021 would be
A) $ 2,133.
B) $ 2,560.
C) $ 3,200.
D) $ 4,000.

Accepted Answer

The answer of A factory machine was purchased for $...

Question 19

A truck was purchased for $ 15,000, and it was estimated to have a $ 3,000 residual value at the end of its useful life. Monthly depreciation expense of $ 250 was recorded using the straight-line method. The annual depreciation rate is
A) 20%.
B) 2%.
C) 8%.
D) 25%.

Accepted Answer

The answer of A truck was purchased for $ 15,000,...

Question 20

The depreciation method that applies a constant percentage to the carrying amount of an asset in calculating depreciation is
A) straight-line.
B) units-of-production.
C) diminishing-balance.
D) perpetual-fair value.

Accepted Answer

The depreciation method that applies a constant percentage to the carrying amount of an asset in calculating depreciation is the diminishing-balance method.

Quiz 1: Long-Lived Assets

The diminishing-balance method of depreciation produces a(n)

A long-lived asset cost $ 24,000 and is estimated to have a $ 3,000 residual value at the end of its 8-year useful life. The annual depreciation expense recorded for the third year using the double diminishing-balance method would be

The calculation of depreciation using the diminishing-balance method

A company purchased factory equipment on June 1, 2021 for $ 48,000. It is estimated that the equipment will have a $ 6,000 residual value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2021 is

Units-of-production is an appropriate depreciation method to use when

Which depreciation method is most frequently used in businesses today?

Under International Financial Reporting Standards, the models which companies can choose to account for their long-lived assets are

A company purchased office equipment for $ 10,000 and estimated a residual value of $ 2,000 at the end of its 4-year useful life. The constant percentage to be applied against carrying amount each year if the double diminishing-balance method is used is

Management should select the depreciation method that

Which of the following methods of calculating depreciation uses measures other than time?

A truck was purchased for $ 15,000, and it was estimated to have a $ 3,000 residual value at the end of its useful life. Monthly depreciation expense of $ 250 was recorded using the straight-line method. The annual depreciation rate is

The depreciation method that applies a constant percentage to the carrying amount of an asset in calculating depreciation is