Question 1

Martin Company purchases a machine at the beginning of the year at a cost of $60,000. The machine is depreciated using the double-declining-balance method. The machine's useful life is estimated to be 4 years with a $5,000 salvage value. The machine's book value at the end of year 3 is:

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Question 2

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the double-declining-balance method. The machine's useful life is estimated to be 5 years with a $4,000 salvage value. Depreciation expense in year 2 is:

Accepted Answer

First, we need to calculate the annual depreciation expense using the double-declining-balance method.

Step 1: Determine the straight-line depreciation rate. 
Straight-line depreciation rate = 1 / Useful life = 1 / 5 = 0.2 or 20%

Step 2: Determine the double-declining-balance depreciation rate. 
Double-declining-balance depreciation rate = Straight-line depreciation rate x 2 = 0.2 x 2 = 0.4 or 40%

Step 3: Calculate the annual depreciation expense. 
Annual depreciation expense = Beginning book value x Double-declining-balance depreciation rate 
Book value at beginning of year 1 = Cost - Accumulated depreciation = $24,000 - 0 = $24,000 
Annual depreciation expense for year 1 = $24,000 x 40% = $9,600 
Book value at beginning of year 2 = Cost - Accumulated depreciation = $24,000 - $9,600 = $14,400 
Annual depreciation expense for year 2 = $14,400 x 40% = $5,760

Therefore, the answer is E ($5,760).

Question 3

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 5 years with a $4,000 salvage value. The book value of the machine at the end of year 2 is:

Accepted Answer

Annual depreciation = (Cost - Salvage value) / Useful life
= ($24,000 - $4,000) / 5
= $4,000

Depreciation expense for year 1 = $4,000
Depreciation expense for year 2 = $4,000

Accumulated depreciation at the end of year 2 = (Depreciation expense for year 1 + Depreciation expense for year 2)
= $4,000 + $4,000
= $8,000

Book value at the end of year 2 = (Cost - Accumulated depreciation)
= $24,000 - $8,000
= $16,000

Therefore, the correct choice is B.

Question 4

Martin Company purchases a machine at the beginning of the year at a cost of $60,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 4 years with a $5,000 salvage value. Depreciation expense in year 4 is:

Accepted Answer

To calculate straight-line depreciation, we need to subtract the salvage value from the cost and divide it by the useful life of the asset. In this case, the depreciation expense per year would be ($60,000 - $5,000) / 4 = $13,750. Therefore, in year 4, the depreciation expense would still be $13,750.

Question 5

Compare the different depreciation methods (straight-line, units-of-production, and double-declining-balance)with respect to the amounts of depreciation expense per period and the total depreciation over the life of the asset.

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Question 6

What is depreciation of plant assets? What are the factors necessary in computing depreciation?

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Question 7

Explain the impact, if any, on depreciation when estimates that determine depreciation change.

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Question 8

How is the cost principle applied to plant asset acquisitions, including lump-sum purchases?

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Question 9

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the double-declining-balance method. The machine's useful life is estimated to be 5 years with a $4,000 salvage value. The machine's book value at the end of year 2 is:

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Question 10

Martin Company purchases a machine at the beginning of the year at a cost of $60,000. The machine is depreciated using the double-declining-balance method. The machine's useful life is estimated to be 4 years with a $5,000 salvage value. Depreciation expense in year 4 is:

Accepted Answer

To use the double-declining-balance method, we first need to calculate the straight-line depreciation rate:

Straight-line rate = 1 / Useful life = 1 / 4 = 0.25

Next, we double the straight-line rate:

Double-declining-balance rate = 2 x Straight-line rate = 0.5

In year 1, the depreciation expense is:

Depreciation expense = Beginning book value x Double-declining-balance rate 
= $60,000 x 0.5 = $30,000

In year 2, the book value is the beginning book value minus the depreciation expense from year 1:

Book value = Beginning book value - Depreciation expense 
= $60,000 - $30,000 = $30,000

In year 2, the depreciation expense is:

Depreciation expense = Book value x Double-declining-balance rate 
= $30,000 x 0.5 = $15,000

In year 3, the book value is the beginning book value minus the sum of the depreciation expenses from year 1 and year 2:

Book value = Beginning book value - Depreciation expense year 1 - Depreciation expense year 2 
= $60,000 - $30,000 - $15,000 = $15,000

In year 3, the depreciation expense is:

Depreciation expense = Book value x Double-declining-balance rate 
= $15,000 x 0.5 = $7,500

In year 4, the book value is the beginning book value minus the sum of the depreciation expenses from year 1, year 2, and year 3:

Book value = Beginning book value - Depreciation expense year 1 - Depreciation expense year 2 - Depreciation expense year 3 
= $60,000 - $30,000 - $15,000 - $7,500 = $7,500

Since the salvage value is $5,000, the machine will have a remaining depreciation expense of:

Remaining depreciation expense = Book value - Salvage value 
= $7,500 - $5,000 = $2,500

Therefore, the depreciation expense in year 4 is $2,500.

Question 11

Victory Company purchases office equipment at the beginning of the year at a cost of $15,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 7 years with a $1,000 salvage value. The book value at the end of 7 years is:

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Question 12

Explain how to calculate total asset turnover. Describe what it reveals about a company's financial condition, whether a higher or lower ratio is desirable, and how it is best applied for comparative purposes.

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Question 13

Define plant assets and identify the four primary issues in accounting for them.

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Question 14

What are some of the variables that make a plant asset's useful life difficult to predict?

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Question 15

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the units-of-production method. The company estimates it will use the machine for 5 years, during which time it anticipates producing 40,000 units. The machine is estimated to have a $4,000 salvage value. The company produces 9,000 units in year 1 and 6,000 units in year 2. Depreciation expense in year 2 is:

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Question 16

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 5 years with a $4,000 salvage value. Depreciation expense in year 2 is:

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Question 17

Martin Company purchases a machine at the beginning of the year at a cost of $60,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 4 years with a $5,000 salvage value. The book value of the machine at the end of year 4 is:

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Question 18

Explain the purpose of and method of depreciation for partial years.

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Question 19

Explain in detail how to compute each of the following depreciation methods: straight-line, units-of-production, and double-declining-balance.

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Question 20

What are the general accounting procedures for recording asset disposals?

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Quiz 10: Plant Assets, Natural Resoures, and Intangibles

Martin Company purchases a machine at the beginning of the year at a cost of $60,000. The machine is depreciated using the double-declining-balance method. The machine's useful life is estimated to be 4 years with a $5,000 salvage value. The machine's book value at the end of year 3 is:

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the double-declining-balance method. The machine's useful life is estimated to be 5 years with a $4,000 salvage value. Depreciation expense in year 2 is:

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 5 years with a $4,000 salvage value. The book value of the machine at the end of year 2 is:

Martin Company purchases a machine at the beginning of the year at a cost of $60,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 4 years with a $5,000 salvage value. Depreciation expense in year 4 is:

Compare the different depreciation methods (straight-line, units-of-production, and double-declining-balance)with respect to the amounts of depreciation expense per period and the total depreciation over the life of the asset.

What is depreciation of plant assets? What are the factors necessary in computing depreciation?

Explain the impact, if any, on depreciation when estimates that determine depreciation change.

How is the cost principle applied to plant asset acquisitions, including lump-sum purchases?

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the double-declining-balance method. The machine's useful life is estimated to be 5 years with a $4,000 salvage value. The machine's book value at the end of year 2 is:

Martin Company purchases a machine at the beginning of the year at a cost of $60,000. The machine is depreciated using the double-declining-balance method. The machine's useful life is estimated to be 4 years with a $5,000 salvage value. Depreciation expense in year 4 is:

Victory Company purchases office equipment at the beginning of the year at a cost of $15,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 7 years with a $1,000 salvage value. The book value at the end of 7 years is:

Explain how to calculate total asset turnover. Describe what it reveals about a company's financial condition, whether a higher or lower ratio is desirable, and how it is best applied for comparative purposes.

Define plant assets and identify the four primary issues in accounting for them.

What are some of the variables that make a plant asset's useful life difficult to predict?

Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 5 years with a $4,000 salvage value. Depreciation expense in year 2 is:

Martin Company purchases a machine at the beginning of the year at a cost of $60,000. The machine is depreciated using the straight-line method. The machine's useful life is estimated to be 4 years with a $5,000 salvage value. The book value of the machine at the end of year 4 is:

Explain the purpose of and method of depreciation for partial years.

Explain in detail how to compute each of the following depreciation methods: straight-line, units-of-production, and double-declining-balance.

What are the general accounting procedures for recording asset disposals?