Question 1

If Boeing depreciates its equipment that cost $120,000 over six years, using a straight-line depreciation schedule, at what rate is it reducing its value by each year, assuming there is no residual value?

Accepted Answer

$120,000 / 6 = $20,000.

Question 2

Karen Knoll Co. bought a machine that cost $8,000. The residual value is $1,000, and the machine life is estimated at four years. Can you prepare a depreciation schedule assuming twice the straight-line rate? Karen uses the declining-balance method.

Accepted Answer

Depr Exp 1:$8,000 × .5 = $4,000; Book Value 1: $8,000 - $4,000 = $4,000;
Depr Exp 2: $4,000 × .5 = $2,000; Acc Depr 2: $2,000 + $4,000 = $6,000; Book Value 2: $4,000 - $2,000 = $2,000;
Depr Exp 3: $2,000 × .5 = $1,000; Acc Depr 3: $1,000 + $2,000 + $4,000 = $7,000;
Book Value 3: $2,000 - $1,000 = $1,000.

Question 3

Bill Murray bought fixtures (seven-year class)for $13,000. Using MACRS, what is the depreciation expense in year 2?

Accepted Answer

The answer of Bill Murray bought fixtures (seven-year class)for $13,000....

Question 4

Tom purchased a condo in Mississippi for rental property at a cost of $106,600. Using the class recovery period for assets, how many years will he be able to depreciate the property and what is the amount each year?

Accepted Answer

The answer of Tom purchased a condo in Mississippi for...

Question 5

Hank bought a four-family residence for rental property. Hank put 20% down on the $300,000 rental unit. How much will he be able to depreciate using the class recovery period for residential rental property each year?

Accepted Answer

The answer of Hank bought a four-family residence for rental...

Question 6

The Life Sciences Division purchased new equipment for manufacturing products. The cost of the new machinery was $160,000. Using a five-year class, what is the expense in year 3 of the MACRS?

Accepted Answer

The answer of The Life Sciences Division purchased new equipment...

Question 7

John Morse Corporation buys a van for $16,000. The estimated life of the van is four years. The residual value of the van is $4,000. After two years, the van is sold for $8,000. What was the difference between the book value and the amount received from selling the van if John used the straight-line method of depreciation?

Accepted Answer

$16,000 - $4,000 = $12,000; $12,000 × .25 = $3,000; $3,000 × 2 years = $6,000;
$16,000 - $6,000 = $10,000; $10,000 - $8,000 = $2,000.

Question 8

Using a straight-line depreciation schedule, at what amount is the company depreciating its equipment if the cost of the equipment is $45,000 and it has a residual value of $5,000 with a useful life of four years?

Accepted Answer

$45,000 - $5,000 = $40,000; $40,000 / 4 = $10,000 per year.

Question 9

Bob bought a new delivery truck for his drug store for $30,000. The residual value is $3,000 with an expected life of five years. Assuming twice the straight-line rate, calculate the book value at the end of year 2 for the declining-balance method.

Accepted Answer

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Quiz 17: Depreciation