Question 1

Adjax bought a machine for $86,000. Its estimated life is 10 years with a residual value of $6,000. Using the straight-line method, what is the book value of the machine at the end of year 2?

Accepted Answer

$86,000 - $6,000 = $80,000 × .1 = $8,000; $86,000 - $8,000 - $8,000 = $70,000.

Question 2

Jay Corp. bought a machine for $15,000. The machine is expected to produce 10,000 units. The machine has a residual value of $5,000. Assuming the machine produces 400 units during year 1, what should the depreciation expense be?

Accepted Answer

($15,000 - $5,000)/10,000 = $1.00 per unit; 400 × $1.00 = $400 depreciation expense.

Question 3

Find the Annual Recovery for Year 1.
 $$\begin{array} { | l | l | l | l | l | } 
\hline \text { Method } & \text { Purchased } & \text { Cost } & \text { Recovery Class } & \text { Annual Recovery for Year 1 } \
\hline \text { MACRS } & \text { July } 8 & \$ 6,000 & 5 & \text { A }\
\hline
\end{array}$$

Accepted Answer

The answer of Find the Annual Recovery for Year 1.
...

Question 4

Complete:
 $$\begin{array} { | l | l | l | l | l | } 
\hline \text { Method } & & & & \
\text { Purchased } & \text { Cost } & \text { Recovery Class } & \text { Recovery Year } & \text { Cost Recovery } \
\hline \text { MACRS July 20 } & \$ 5,000 & 7 & 6 & \text { A } \
\hline \text { MACRS Nov 5 } & \$ 11,000 & 20 & 13 & \text { B } \
\hline
\end{array}$$

Accepted Answer

The answer of Complete:
 \[\begin{array} { | l | l...

Question 5

Find the Annual Recovery for Year 1.
 $$\begin{array} { | c | c | c | c | c | } 
\hline \text { Method } & \text { Purchased } & \text { Cost } & \text { Recovery Class } & \begin{array} { c } 
\text { Annual Recovery for } \
\text { Year 1 }
\end{array} \
\hline \text { MACRS } & \text { July 15 } & \$ 21,000 & 10 & \text { A } \
\hline
\end{array}$$

Accepted Answer

The answer of Find the Annual Recovery for Year 1.
...

Question 6

Find the Annual Recovery for Year 1.
 $$\begin{array} { | c | c | c | c | c | } 
\hline \text { Method } & \text { Purchased } & \text { Cost } & \text { Recovery Class } & \begin{array} { c } 
\text { Annual Recovery for } \
\text { Year } 1
\end{array} \
\hline \text { MACRS } & \text { May } 3 & \$ 18,000 & 3 & \text { A } \
\hline
\end{array}$$

Accepted Answer

The answer of Find the Annual Recovery for Year 1.
...

Question 7

Match the following terms with their definitions.
-Trade-in

Accepted Answer

Salvage value is the estimated value of an asset at the end of its useful life, which aligns with the definition of trade-in value as it represents the value for which an asset can be traded in or sold after it has been used.

Question 8

Using the declining-balance method, complete the table as shown (twice the straight-line rate):
Auto: $29,000; Residual: $2,000; Estimated Life: 5 Yrs
 $$\begin{array} { | c | c | c | c | c | c | c | } 
\hline \text { Year } & \text { Cost } & \begin{array} { c } 
\text { Accumulated } \
\text { Depreciation } \
\text { B.O.Y. }
\end{array} & \begin{array} { c } 
\text { Book Value } \
\text { B.O.Y }
\end{array} & \begin{array} { c } 
\text { Depreciation } \
\text { Expense }
\end{array} & \begin{array} { c } 
\text { Accumulated } \
\text { Depreciation } \
\text { E.O.Y. }
\end{array} & \begin{array} { c } 
\text { Book Value } \
\text { E.O.Y }
\end{array} \
\hline 1 & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } & \text { F } \
\hline 2 & \mathrm { G } & \mathrm { H } & \mathrm { I } & \mathrm { J } & \mathrm { K } & \mathrm { L } \
\hline 3 & \mathrm { M } & \mathrm { N } & \mathrm { O } & \mathrm { P } & \mathrm { Q } & \mathrm { R } \
\hline
\end{array}$$

Accepted Answer

The answer of Using the declining-balance method, complete the table...

Question 9

Match the following terms with their definitions.
-Depreciation schedule

Accepted Answer

A depreciation schedule is a table showing the allocation of depreciation over the useful life of an asset.

Question 10

Using the declining-balance method, complete the table as shown (twice the straight-line rate):
Auto: $30,000
Estimated life: 5 years
Residual value: $800
 $\begin{array}{|c|c|c|c|c|c|c|}
\hline \text { Year } & \text { Cost } & \begin{array}{l}
\text { Accumulated } \
\text { Depreciation } \
\text { B.O.Y. }
\end{array} & \begin{array}{l}
\text { Book Value } \
\text { B.O.Y }
\end{array} & \begin{array}{l}
\text { Depreciation } \
\text { Expense }
\end{array} & \begin{array}{l}
\text { Accumulated } \
\text { Depreciation } \
\text { E.O.Y. }
\end{array} & \begin{array}{l}
\text { Book Value } \
\text { E.O.Y }
\end{array} \
\hline 1& \$ 30,000 & \text { A } & B & \text { C } & \text { D } & E \
\hline2 & \$ 30,000 & F & G & \mathrm{H} & \text { I } & \mathrm{J} \
\hline 3& \$ 30,000 &K & L &M& N& 0 \
\hline
\end{array}$

Accepted Answer

The answer of Using the declining-balance method, complete the table...

Question 11

Martha Run buys a new duplicating machine for $20,000 with a residual value of $2,000. Its estimated life is five years. Using the declining-balance method, calculate the book value at the end of year 1, assuming twice the straight-line rate.

Accepted Answer

$20,000 × .4 = $8,000; $20,000 - $8,000 = $12,000.

Question 12

Apple Co. bought a car with an estimated life of five years for $12,000. The residual value of the car is $2,000. What will be the amount of depreciation expense each year using the straight-line method? If the car was bought on April 3, what would be the depreciation for the first year?

Accepted Answer

($12,000 - $2,000)/ 5 = $2,000 depr exp per yr; 9/12 × $2,000 = $1,500.

Question 13

Joe Wong, owner of Cookie Palace, is discussing with his accountant which method of depreciation would be best for his new delivery truck. The cost of the truck is $20,000 with an estimated life of four years. The residual value of the truck is $2,500. Prepare a depreciation schedule using the declining-balance method at twice the straight-line rate.

Accepted Answer

Depr Exp 1 = .5 × $20,000 = $10,000;
Acc Dep 1 = 0 + $10,000 = $10,000;
Book Value 1 = $20,000 - $10,000 = $10,000;
Acc Depr 2 = $10,000;
Book Value BOY 2 = $10,000;
Depr Exp 2 = $10,000 × .5 = $5,000;
Acc Depr EOY 2 = $10,000 + $5,000 = $15,000;
Book Value EOY 2 = $10,000 - $5,000 = $5,000;
Acc Depr 3 = $10,000 + $5,000 = $15,000;
Book Value BOY 3 = $5,000;
Depr Exp 3 = $5,000 × .5 = $2,500;
Acc Depr EOY 3 = $2,500 + $5,000 + $10,000 = $17,500;
Book Value EOY 3 = $5,000 - $2,500 = $2,500.

Question 14

Using the declining-balance method, complete the table as shown (twice the straight-line rate):
Auto: $26,000; Residual Value: $600; Estimated Life: 10 Yrs
 $$\begin{array} { | l | l | l | l | l | l | l | } 
\hline & & \text { Accumulated } & & & \text { Accumulated } & \
& & \text { Depreciation } & \text { Book Value } & \text { Depreciation } & \text { Depreciation } & \text { Book Value } \
 \text { Year } & \text { Cost } & \text { B.O.Y. } & \text { B.O.Y } & \text { Expense } & \text { E.O.Y. } & \text { E.O.Y } \
\hline 1 & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } & \text { F } \
\hline 2 & \text { G } & \text { H } & \text { I } & \text { J } & \text { K } & \text { L } \
\hline 3 & \text { M } & \text { N } & \text { O } & \text { P } & \text { Q } & \text { R } \
\hline
\end{array}$$

Accepted Answer

The answer of Using the declining-balance method, complete the table...

Question 15

Complete the following (use the straight-line method):
Auto: $40,000; Residual: $4,000; Estimated Life: 5 Yrs
 $$\begin{array} { | c | c | c | c | c | } 
\hline \text { Year } & \text { Cost } & \begin{array} { c } 
\text { Depreciation } \
\text { Expense }
\end{array} & \begin{array} { c } 
\text { Accumulated } \
\text { Depreciation }
\end{array} & \text { Book Value } \
\hline 1 & \mathrm {~A} & \mathrm {~B} & \mathrm { C } & \mathrm { D } \
\hline 2 & \mathrm { E } & \mathrm { F } & \mathrm { G } & \mathrm { H } \
\hline 3 & \mathrm { I } & \mathrm { J } & \mathrm { K } & \mathrm { L } \
\hline
\end{array}$$

Accepted Answer

The answer of Complete the following (use the straight-line method):
Auto:...

Question 16

Young Corporation bought a car with an estimated life of five years for $25,000. The residual value of the car is $5,000. After three years, the car was sold for $11,000. What was the difference between book value and selling price if Young used the straight-line method of depreciation?

Accepted Answer

($25,000 - $5,000)/ 5 = $4,000; $4,000 × 3 = $12,000; $25,000 - $12,000 = $13,000 = Book Value; $13,000 - $11,000 (selling price)= $2,000.

Question 17

Johnson Company bought a light general purpose truck for $20,000. Calculate the yearly depreciation using MACRS (5-year class)for the first three years.

Accepted Answer

The answer of Johnson Company bought a light general purpose...

Question 18

Using MACRS 7 year class, what is depreciation in year 2 on furniture costing $12,000?

Accepted Answer

The answer of Using MACRS 7 year class, what is...

Question 19

Find the Annual Recovery for Year 1.
 $$\begin{array} { | c | c | c | c | c | } 
\hline \text { Method } & \text { Purchased } & \text { Cost } & \text { Recovery Class } & \begin{array} { c } 
\text { Annual Recovery for } \
\text { Year 1 }
\end{array} \
\hline \text { MACRS } & \text { Nov } 5 & \$ 12,000 & 3 & \text { A } \
\hline
\end{array}$$

Accepted Answer

The answer of Find the Annual Recovery for Year 1.
...

Question 20

A truck costing $25,000 with a residual value of $5,000 was purchased by Rim Corporation. The truck's estimated life is 10 years. At the end of year 2 what is the book value using the declining-balance method? Assume a depreciation rate of twice the straight-line rate.

Accepted Answer

$25,000 × .2 = $5,000; $25,000 - $5,000 = $20,000; $20,000 × .2 = $4,000; $4,000 + $5,000 = $9,000; $25,000 - $9,000 = $16,000.

Quiz 17: Depreciation

Adjax bought a machine for $86,000. Its estimated life is 10 years with a residual value of $6,000. Using the straight-line method, what is the book value of the machine at the end of year 2?

Jay Corp. bought a machine for $15,000. The machine is expected to produce 10,000 units. The machine has a residual value of $5,000. Assuming the machine produces 400 units during year 1, what should the depreciation expense be?

Find the Annual Recovery for Year 1. $\begin{array} { | l | l | l | l | l | } \hline \text { Method } & \text { Purchased } & \text { Cost } & \text { Recovery Class } & \text { Annual Recovery for Year 1 } \\\hline \text { MACRS } & \text { July } 8 & \$ 6,000 & 5 & \text { A }\\\hline\end{array}$

Match the following terms with their definitions. -Trade-in

Match the following terms with their definitions. -Depreciation schedule

Martha Run buys a new duplicating machine for $20,000 with a residual value of $2,000. Its estimated life is five years. Using the declining-balance method, calculate the book value at the end of year 1, assuming twice the straight-line rate.

Apple Co. bought a car with an estimated life of five years for $12,000. The residual value of the car is $2,000. What will be the amount of depreciation expense each year using the straight-line method? If the car was bought on April 3, what would be the depreciation for the first year?

Young Corporation bought a car with an estimated life of five years for $25,000. The residual value of the car is $5,000. After three years, the car was sold for $11,000. What was the difference between book value and selling price if Young used the straight-line method of depreciation?

Johnson Company bought a light general purpose truck for $20,000. Calculate the yearly depreciation using MACRS (5-year class)for the first three years.

Using MACRS 7 year class, what is depreciation in year 2 on furniture costing $12,000?

A truck costing $25,000 with a residual value of $5,000 was purchased by Rim Corporation. The truck's estimated life is 10 years. At the end of year 2 what is the book value using the declining-balance method? Assume a depreciation rate of twice the straight-line rate.