Question 1

On December 31, 2022, Cee Corp.sells an asset that originally cost $300,000 for $75,000.The company recognized a loss on disposal of $25,000.What was the balance of the accumulated depreciation account after the current year's depreciation of $15,000 was recorded?

Accepted Answer

The balance in the accumulated depreciation account can be calculated by understanding that the loss on disposal indicates the book value of the asset was $25,000 more than the selling price. Given the asset sold for $75,000, its book value was $100,000. Since the original cost was $300,000, and the book value at disposal was $100,000, the accumulated depreciation must be $200,000 ($300,000 original cost - $100,000 book value). The current year's depreciation of $15,000 is included in this accumulated depreciation, indicating it was already accounted for in reaching the $200,000 total accumulated depreciation.

Question 2

If the carrying amount of an asset equals its selling price at the date of sale, then

Accepted Answer

When the carrying amount of an asset equals its selling price, there is no difference between the book value and the sale price, resulting in no gain or loss on disposal.

Question 3

A truck costing $32,000 was destroyed when its engine caught fire.At the date of the fire, the accumulated depreciation on the truck was $16,000.An insurance cheque for $37,000 was received based on the replacement cost of the truck.The entry to record the insurance proceeds and the disposition of the truck will include a

Accepted Answer

The answer of A truck costing $32,000 was destroyed when...

Question 4

The carrying amount of an asset is the difference between the

Accepted Answer

The carrying amount of an asset is calculated by subtracting the accumulated depreciation from the original cost of the asset. This reflects the asset's book value over time as it depreciates.

Question 5

When an impairment loss is recorded what is the effect (if any) on Depreciation?

Accepted Answer

The answer of When an impairment loss is recorded what...

Question 6

If an asset is fully depreciated and retired for proceeds equal to its residual value

Accepted Answer

When an asset is fully depreciated and retired for proceeds equal to its residual value, it means the asset's book value equals its residual value. Selling it for the residual value means there's no difference between the sale price and the book value, resulting in no gain or loss on disposal.

Question 7

Which of the following statements isincorrect ?

Accepted Answer

Reversals of revaluation gains or write-ups are not prohibited; they can be reversed if the asset's carrying amount decreases, reflecting changes in fair value. This adjustment is made through profit or loss if it represents the reversal of a revaluation decrease previously recognized in profit or loss, or through other comprehensive income if it reverses a revaluation increase previously recognized in equity.

Question 8

Can the accumulated depreciation of a depreciable asset be greater than an assets cost when it is fully depreciated and still in use?

Accepted Answer

Accumulated depreciation cannot exceed the asset's initial cost, even if the asset is still in use. Depreciation stops when the asset's book value equals its salvage value or when it is fully depreciated, regardless of its continued use.

Question 9

Use the following information for questions 
On January 1, 2022, Flowers Unlimited purchased a new delivery van.The van cost $35,000 with an estimated life of 5 years and $5,000 residual value.Double diminishing-balance depreciation will be used.
-What is the balance in the Accumulated Depreciation account at the end of 2023?

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 2022, depreciation is $35,000 * 40% = $14,000. For 2023, the book value is $35,000 - $14,000 = $21,000, and depreciation is $21,000 * 40% = $8,400. Accumulated depreciation at the end of 2023 is $14,000 + $8,400 = $22,400.

Question 10

Mandeep Ltd.has decided to change the estimate of the useful life of an asset that has been in service for two years.Which of the following statements describes the proper way to revise a useful life estimate?

Accepted Answer

Revisions in the useful life of an asset affect both the current and future years, as the change is considered a change in accounting estimate and is applied prospectively.

Question 11

A truck costing $14,000 and on which $12,000 of accumulated depreciation has been recorded was disposed of for $3,000 cash.The entry to record this event would include a

Accepted Answer

The answer of A truck costing $14,000 and on which...

Question 12

When an asset is sold, a gain is reported that is equal to the amount that the

Accepted Answer

A gain on the sale of an asset is recognized when the proceeds from the sale exceed the asset's carrying amount, which is its original cost minus any accumulated depreciation.

Question 13

If the disposal of an asset occurs during the year, depreciation is

Accepted Answer

Depreciation is recorded for the portion of the year that the asset was in use, up until the date it was disposed of. This reflects the expense associated with the asset's use during that specific period.

Question 14

Which of the following statements is not true?

Accepted Answer

Cash flow is not affected by the use of different depreciation methods because depreciation is a non-cash expense. The choice of depreciation method only affects the allocation of the cost of an asset over its useful life, not the actual cash flows.

Question 15

With regard to depreciation and income taxes, which of the following statements is not true?

Accepted Answer

Statement A is not true because, for tax purposes, taxpayers are required to follow specific depreciation methods and rates as prescribed by tax laws and regulations, such as the Canada Revenue Agency in Canada, rather than choosing a method that reflects the consumption of future economic benefits, which is more relevant to financial accounting.

Question 16

A truck costing $15,000 and on which $14,000 of accumulated depreciation has been recorded was discarded as having no value.The entry to record this event would include a

Accepted Answer

The truck's book value is $1,000 ($15,000 cost - $14,000 accumulated depreciation). Discarding it with no value results in a $1,000 loss.

Question 17

Anali Corporation has determined that its drilling equipment is impaired.The cost of the equipment is $210,000.Accumulated depreciation recorded to date is $140,000.Anali has determined, that based on market data, the recoverable amount will be $45,000.Determine the amount of the impairment loss that Anali will be required to record.

Accepted Answer

The impairment loss is calculated as the difference between the carrying amount of the asset and its recoverable amount. The carrying amount is the cost of the asset minus accumulated depreciation, which is $210,000 - $140,000 = $70,000. The recoverable amount is the fair value of the asset, which is $45,000. Therefore, the impairment loss is $70,000 - $45,000 = $25,000.

Question 18

An asset with a cost of $45,000 was sold for $9,500 and resulted in a gain of $2,000.How much was accumulated depreciation at the time of sale?

Accepted Answer

The answer of An asset with a cost of $45,000...

Question 19

A change in the estimated useful life of equipment requires

Accepted Answer

When the estimated useful life of equipment changes, the amount of depreciation expense is adjusted for the current and future years to reflect the new estimate. This does not affect the depreciation already recognized in previous years.

Question 20

On July 1, 2022, Happy Hound Kennels Inc.sells equipment for $20,000.The equipment originally cost $80,000, had an estimated 5-year life and an expected residual value of $10,000.The Accumulated Depreciation account had a balance of $49,000 on January 1, 2022, using the straight-line method.The gain or loss on disposal is

Accepted Answer

The book value of the equipment on July 1, 2022, is $80,000 - $49,000 - ($80,000 - $10,000)/5 * 0.5 = $31,000. Selling it for $20,000 results in a $11,000 loss.

Quiz 9: Reporting and Analyzing Long-Lived Assets