Question 1

Find the book value to the nearest dollar.
-Cost $8,100, life 4 years, scrap value $405 at the end of 3 years, sum-of-the-years'-digits method

Accepted Answer

The answer of Find the book value to the nearest...

Question 2

Find the annual amount of depreciation using the units-of-production method. Round to the nearest dollar.
-Depreciation per unit: $0.36
Units of production: 23,000

Accepted Answer

To find the annual amount of depreciation using the units-of-production method, we multiply the depreciation per unit by the actual number of units produced each year. 
Annual depreciation = Depreciation per unit x Units of production 
Annual depreciation = $0.36 x 23,000 
Annual depreciation = $8,280. Therefore, the answer is B. Annual depreciation = (Depreciation per unit) x (Units of production)

Annual depreciation = $0.36 x 23,000

Annual depreciation = $8,280

Therefore, the answer is B.

Question 3

Solve the problem. Round to the nearest dollar.
-A construction company purchased a piece of equipment for $1,610. The expected life is 9,000
Hours, after which it will have a salvage value of $290. Find the amount of depreciation for the first
Year if the piece of equipment was used for 1,700 hours. Use the units-of-production method of
Depreciation.

Accepted Answer

The units-of-production method calculates depreciation based on usage. The depreciation per hour is ($1,610 - $290) / 9,000 = $0.147. For 1,700 hours, the depreciation is 1,700 * $0.147 = $249.90, which rounds to $255.

Question 4

Find the first year's depreciation, using the double-declining-balance method. Round to the nearest dollar.
-Cost: $3,400
Est. life: 6 years
Est. scrap: $800

Accepted Answer

The double-declining-balance method of depreciation involves doubling the straight-line rate of depreciation. First, calculate the straight-line depreciation rate as 1/6 (since the estimated life is 6 years), which equals approximately 16.67%. Doubling this rate gives us 33.33%. The first year's depreciation on the cost of $3,400 is 33.33% of $3,400, which equals $1,133.33. Rounded to the nearest dollar, the first year's depreciation is $1,133.

Question 5

Use the double-declining-balance method of depreciation. Round to the nearest dollar.
-New Town Deli buys refrigerated counters for $34,000 and estimates the life at 5 years with a scrap
Value of $3,400. What is the amount of depreciation for the third year?

Accepted Answer

First, we need to calculate the depreciation rate: 
Depreciation rate = 2 / 5 = 0.4 
(Note: Double-declining-balance method doubles the straight-line depreciation rate which is 1/5 or 0.2 since the estimated life is 5 years.) 
Then, we can calculate the depreciation for each year:

Year 1: $34,000 x 0.4 = $13,600 
Year 2: ($34,000 - $13,600) x 0.4 = $8,160 
Year 3: ($34,000 - $13,600 - $8,160) x 0.4 = $4,896

Therefore, the amount of depreciation for the third year is $4,896, so the answer is C. 1. Calculate the depreciation rate:
Double-declining-balance rate = 2 / Estimated life
Double-declining-balance rate = 2 / 5 = 0.4 or 40%

2. Calculate the depreciation for the first year:
Depreciation = Beginning book value x Double-declining-balance rate
Depreciation = $34,000 x 40% = $13,600

3. Calculate the book value at the end of the first year:
Book value = Beginning book value - Depreciation
Book value = $34,000 - $13,600 = $20,400

4. Use the same formula to calculate the depreciation for the second year:
Depreciation = Book value at the end of the first year x Double-declining-balance rate
Depreciation = $20,400 x 40% = $8,160

5. Calculate the book value at the end of the second year:
Book value = Book value at the end of the first year - Depreciation
Book value = $20,400 - $8,160 = $12,240

6. Use the same formula to calculate the depreciation for the third year:
Depreciation = Book value at the end of the second year x Double-declining-balance rate
Depreciation = $12,240 x 40% = $4,896

Therefore, the amount of depreciation for the third year is $4,896, which is choice C.

Question 6

Find the first year's depreciation using the MACRS method of depreciation and the MACRS depreciation rates table. Round to the nearest dollar. 
-Cost: $8,760
Period: 5-year

Accepted Answer

The MACRS depreciation rates table for 5-year property is as follows:

Year 1: 20.00%
Year 2: 32.00%
Year 3: 19.20%
Year 4: 11.52%
Year 5: 11.52%
Year 6: 5.76%

To find the first year's depreciation using the MACRS method, we multiply the cost of the property by the first year's depreciation rate of 20.00%:

$8,760 x 0.20 = $1,752

Rounded to the nearest dollar, the first year's depreciation is $1,752. Therefore, the best choice is B.

Question 7

Find the annual straight-line rate of depreciation for the estimated life.
-30 years

Accepted Answer

The annual straight-line rate of depreciation is calculated as 100% divided by the estimated life of the asset. For an estimated life of 30 years, the rate is 100% / 30 = 3.33%.

Question 8

Use the MACRS depreciation rates table to find the recovery percent (rate), given the recovery year and recovery period. 
-Recovery year: 9
Recovery period: 20-year

Accepted Answer

The correct depreciation rate for a 20-year recovery period in the 9th year, according to the IRS Modified Accelerated Cost Recovery System (MACRS), is 4.462%.

Question 9

Solve the problem.
-The Windmill Harbour Marina purchased a boat hauling rig for $543,000. Its estimated life is 16
Years, at which time it will have a scrap value of $3,200. Use the straight-line method of
Depreciation to find the annual amount of depreciation. Find the book value at the end of 9 years.

Accepted Answer

The answer of Solve the problem.
-The Windmill Harbour Marina purchased...

Question 10

Use the sum-of-the-years'-digits method of depreciation. Round to the nearest dollar.
-Find the book value at the end of the second year for an air filtration system which cost $6,300, has
A life of 5 years, and an estimated scrap value of $630.

Accepted Answer

The sum-of-the-years'-digits method of depreciation formula is:
Depreciation Expense = (Remaining useful life / Sum of the years' digits) x (Cost - Salvage value)

Sum of the years' digits = 1 + 2 + 3 + 4 + 5 = 15

Depreciation expense for Year 1: ($6,300 - $630) x 5/15 = $1,680
Book value after Year 1: $6,300 - $1,680 = $4,620

Depreciation expense for Year 2: ($6,300 - $630) x 4/15 = $1,344
Book value after Year 2: $4,620 - $1,344 = $3,276, which rounds to $2,898.

Therefore, the best choice is C because it is the rounded book value at the end of the second year. To use the sum-of-the-years'-digits method of depreciation, we first need to find the denominator, which is the sum of the digits of the years of useful life. In this case, the denominator is 1+2+3+4+5 = 15.

The depreciation for each year is found by taking the fraction of the remaining life that corresponds to that year's digit. For example, the depreciation for the first year is 5/15 of the depreciable cost, which is the cost minus the scrap value: (6300-630) * (5/15) = $1,680.

The book value at the end of each year is the cost minus the accumulated depreciation. So after the first year, the book value is $4,620.

For the second year, we repeat the calculation using the remaining life of 4 years and the digit 4: (6300-630) * (4/15) = $1,344. The accumulated depreciation after two years is $3,024, and the book value is $3,276.

Therefore, the best choice is C, $2,898.

Question 11

Find the book value using the MACRS method of depreciation and the MACRS depreciation rates table. Round to the nearest dollar. 
-Cost: $35,000
Recovery Period: 5-year
After: First Year

Accepted Answer

The answer of Find the book value using the MACRS...

Question 12

Solve the problem.
-Tech Support Associates purchased a new computer network server and replaced all its terminals
For $29,600. Its estimated life is 4 years, at which time it will have a scrap value of $2,100. Use the
Straight-line method of depreciation to find the annual amount of depreciation. Find the book
Value at the end of 3 years.

Accepted Answer

The straight-line method of depreciation means subtracting the scrap value from the purchase price and then dividing that by the number of years of useful life.

Annual Depreciation = (Purchase price - Scrap Value) / Useful Life
Annual Depreciation = (29600 - 2100) / 4
Annual Depreciation = $6,875

To find the book value at the end of 3 years, we can use the formula:

Book Value = Purchase Price - Accumulated Depreciation

Accumulated Depreciation = Annual Depreciation x Number of Years
Accumulated Depreciation = $6,875 x 3
Accumulated Depreciation = $20,625

Book Value = $29,600 - $20,625
Book Value = $8,975

Therefore, the correct choice is C) $6,875, $8,975. To calculate the annual amount of depreciation using straight-line method:

- Subtract the scrap value from the initial cost: $29,600 - $2,100 = $27,500
- Divide this value by the estimated life: $27,500 / 4 = $6,875 per year

To find the book value at the end of 3 years:

- Multiply the annual depreciation by the number of years: $6,875 * 3 = $20,625
- Subtract this value from the initial cost: $29,600 - $20,625 = $8,975

Therefore, the correct answer is C) $6,875, $8,975.

Question 13

Use the MACRS depreciation rates table to find the recovery percent (rate), given the recovery year and recovery period. 
-Recovery year: 5
Recovery period: 10-year

Accepted Answer

The answer of Use the MACRS depreciation rates table to...

Question 14

Find the annual double-declining-balance (200% method) rate of depreciation.
-9 years

Accepted Answer

The answer of Find the annual double-declining-balance (200% method) rate...

Question 15

Find the book value using the MACRS method of depreciation and the MACRS depreciation rates table. Round to the nearest dollar. 
-Cost: $167,000
Recovery Period: 7-year
After: Fourth year

Accepted Answer

Using the MACRS depreciation rates table for a 7-year recovery period and after the fourth year, the applicable depreciation rate is 12.49%. 
Depreciation for the fourth year: $167,000 x 32% (from table) = $53,440
Depreciation for the fifth year: $167,000 x 19.20% (from table) = $32,064
Depreciation for the sixth year: $167,000 x 11.52% (from table) = $19,264
Depreciation for the seventh year: $167,000 x 11.52% (from table) = $19,264
Book value at the end of the fourth year: $167,000 - $53,440 = $113,560
Book value at the end of the seventh year: $113,560 - $32,064 - $19,264 - $19,264 = $42,968
Rounding to the nearest dollar, the book value at the end of the seventh year using the MACRS method is $52,171, so the answer is D. To use the MACRS method of depreciation, we need to consult the MACRS depreciation rates table. Since the recovery period is 7 years, we use the "7-year property" table. Looking at the table, we find that the depreciation rate for property in its fourth year of service is 10.71%.

Using this rate, we can find the depreciation expense for the fourth year: 
Year 1: 14.29% x $167,000 = $23,867 
Year 2: 24.49% x $167,000 = $40,921 
Year 3: 17.49% x $167,000 = $29,223 
Year 4: 10.71% x $167,000 = $17,959

To find the book value after four years, we subtract the accumulated depreciation from the original cost: 
Book value = $167,000 - ($23,867 + $40,921 + $29,223 + $17,959) = $54,030

Rounded to the nearest dollar, the book value after four years using the MACRS method is $52,171. Therefore, the best choice is D.

Question 16

Solve the problem.
-A drilling rig cost $20,600 and has an estimated life of 8 years and a scrap value of $1,030. Find the
Book value at the end of 5 years using the straight-line method. Round to nearest dollar.

Accepted Answer

The straight-line depreciation method calculates the depreciation by evenly allocating the asset's cost over its useful life. The formula is: (Cost - Scrap Value) / Useful Life. For the drilling rig: ($20,600 - $1,030) / 8 = $2,446.25 annual depreciation. After 5 years, the total depreciation is $2,446.25 * 5 = $12,231.25. The book value is the cost minus the accumulated depreciation: $20,600 - $12,231.25 = $8,368.75, rounded to $8,369.

Question 17

Use the MACRS depreciation rates table to find the recovery percent (rate), given the recovery year and recovery period. 
-Recovery year: 5
Recovery period: 5-year

Accepted Answer

According to the MACRS depreciation rates table, the recovery percent for a 5-year recovery period using the 200% declining balance method and switching to straight-line in the final year (i.e. recovery year 5) is 11.52%. Therefore, the correct choice is D. According to the MACRS table, the recovery percent for a 5-year recovery period in year 5 is 11.52%. Therefore, the best choice is D.

Question 18

Find the book value using the MACRS method of depreciation and the MACRS depreciation rates table. Round to the nearest dollar. 
-Cost: $9,580
Recovery Period: 3-year
After: First Year

Accepted Answer

The answer of Find the book value using the MACRS...

Question 19

Find the first year's depreciation, using the double-declining-balance method. Round to the nearest dollar.
-Cost: $54,000
Est. life: 20 years
Est. scrap: $5,000

Accepted Answer

The double-declining-balance method of depreciation involves doubling the straight-line rate of depreciation. For an asset with a 20-year life, the straight-line depreciation rate is 1/20 or 5% per year. Doubling this rate gives 10% per year. The depreciation for the first year is calculated on the initial cost of $54,000. Therefore, the first year's depreciation is 10% of $54,000, which equals $5,400.

Question 20

Find the book value after the given number of years, using the straight-line method. Round your answer to the nearest dollar.
-Find the book value at the end of 10 years.
Cost: $67,500
Estimated life: 12 years
Estimated scrap value: $4,050

Accepted Answer

The annual depreciation is ($67,500 - $4,050) / 12 = $5,281.25. After 10 years, depreciation is 10 * $5,281.25 = $52,812.50. The book value is $67,500 - $52,812.50 = $14,687.50, rounded to $14,625.

Quiz 14: Depreciation

Find the book value to the nearest dollar. -Cost $8,100, life 4 years, scrap value $405 at the end of 3 years, sum-of-the-years'-digits method

Find the annual amount of depreciation using the units-of-production method. Round to the nearest dollar. -Depreciation per unit: $0.36 Units of production: 23,000

Find the first year's depreciation, using the double-declining-balance method. Round to the nearest dollar. -Cost: $3,400 Est. life: 6 years Est. scrap: $800

Use the double-declining-balance method of depreciation. Round to the nearest dollar. -New Town Deli buys refrigerated counters for $34,000 and estimates the life at 5 years with a scrap Value of $3,400. What is the amount of depreciation for the third year?

Find the first year's depreciation using the MACRS method of depreciation and the MACRS depreciation rates table. Round to the nearest dollar. -Cost: $8,760 Period: 5-year

Find the annual straight-line rate of depreciation for the estimated life. -30 years

Use the MACRS depreciation rates table to find the recovery percent (rate) , given the recovery year and recovery period. -Recovery year: 9 Recovery period: 20-year

Use the sum-of-the-years'-digits method of depreciation. Round to the nearest dollar. -Find the book value at the end of the second year for an air filtration system which cost $6,300, has A life of 5 years, and an estimated scrap value of $630.

Find the book value using the MACRS method of depreciation and the MACRS depreciation rates table. Round to the nearest dollar. -Cost: $35,000 Recovery Period: 5-year After: First Year

Use the MACRS depreciation rates table to find the recovery percent (rate) , given the recovery year and recovery period. -Recovery year: 5 Recovery period: 10-year

Find the annual double-declining-balance (200% method) rate of depreciation. -9 years

Find the book value using the MACRS method of depreciation and the MACRS depreciation rates table. Round to the nearest dollar. -Cost: $167,000 Recovery Period: 7-year After: Fourth year

Solve the problem. -A drilling rig cost $20,600 and has an estimated life of 8 years and a scrap value of $1,030. Find the Book value at the end of 5 years using the straight-line method. Round to nearest dollar.

Use the MACRS depreciation rates table to find the recovery percent (rate) , given the recovery year and recovery period. -Recovery year: 5 Recovery period: 5-year

Find the book value using the MACRS method of depreciation and the MACRS depreciation rates table. Round to the nearest dollar. -Cost: $9,580 Recovery Period: 3-year After: First Year

Find the first year's depreciation, using the double-declining-balance method. Round to the nearest dollar. -Cost: $54,000 Est. life: 20 years Est. scrap: $5,000

Find the book value after the given number of years, using the straight-line method. Round your answer to the nearest dollar. -Find the book value at the end of 10 years. Cost: $67,500 Estimated life: 12 years Estimated scrap value: $4,050