Question 1

The proper journal entry to purchase a computer costing $975 on account to be utilized within the business would be

Accepted Answer

The answer of The proper journal entry to purchase a...

Question 2

Which of the following is true?

Accepted Answer

Regardless of the depreciation method, the total amount of depreciation expense during the life of the asset will be the same as it is based on the cost of the asset and its useful life.

Question 3

A machine with a cost of $75,000 has an estimated residual value of $5,000 and an estimated life of 4 years or 18,000 hours.What is the amount of depreciation for the second full year,using the double-declining-balance method?

Accepted Answer

The double-declining-balance method calculates depreciation by doubling the straight-line rate. The straight-line rate is 1/4 (25%) since the machine's life is 4 years. Double that rate to get 50%. The first year's depreciation is 50% of $75,000, which is $37,500. The second year's depreciation is 50% of the remaining book value ($75,000 - $37,500 = $37,500), which is $18,750.

Question 4

The calculation for annual depreciation using the straight-line depreciation method is

Accepted Answer

The straight-line depreciation method requires dividing the depreciable cost (initial cost minus salvage value) by the estimated useful life to calculate annual depreciation. Therefore, the correct choice is D.

Question 5

Equipment with a cost of $160,000,an estimated residual value of $40,000,and an estimated life of 15 years was depreciated by the straight-line method for 4 years.Due to obsolescence,it was determined that the useful life should be shortened by 3 years and the residual value changed to zero.The depreciation expense for the current and future years is

Accepted Answer

The answer of Equipment with a cost of $160,000,an estimated...

Question 6

The depreciation method that does not use residual value in calculating the first year's depreciation expense is

Accepted Answer

The double-declining-balance method does not use residual value in calculating the first year's depreciation expense; it applies a constant rate to the book value.

Question 7

Residual value is also known as all of the following except

Accepted Answer

All of the other options (B, C, D) are actual terms used to refer to residual value. Net book value refers to the value of an asset as recorded in a company's accounting records, and may be different than the residual value.

Question 8

On June 1,Michael Company purchased equipment at a cost of $120,000 that has a depreciable cost of $90,000 and an estimated useful life of 3 years or 30,000 hours. Using straight-line depreciation,calculate depreciation expense for the second year.

Accepted Answer

The answer of On June 1,Michael Company purchased equipment at...

Question 9

The most widely used depreciation method is

Accepted Answer

Straight-line is the most widely used depreciation method because it is the simplest and easiest to understand. It also results in a steady and predictable reduction in the value of the asset over time, making it easy to plan for future asset replacements or upgrades.

Question 10

Equipment with a cost of $220,000 has an estimated residual value of $30,000 and an estimated life of 10 years or 19,000 hours.It is to be depreciated by the straight-line method.What is the amount of depreciation for the first full year,during which the equipment was used 2,100 hours?

Accepted Answer

The answer of Equipment with a cost of $220,000 has...

Question 11

On June 1,Scotter Company purchased equipment at a cost of $120,000 that has a depreciable cost of $90,000 and an estimated useful life of 3 years or 30,000 hours. Using straight-line depreciation,calculate depreciation expense for the first year.

Accepted Answer

To calculate depreciation expense using straight-line depreciation, divide the depreciable cost by the estimated useful life:
$90,000 / 3 years = $30,000 per year

Therefore, the depreciation expense for the first year is:
$30,000 / 12 months = $2,500 per month
$2,500 per month x 7 months (June-December) = $17,500

So, the best choice is C, $17,500.

Question 12

The formula for depreciable cost is

Accepted Answer

Depreciable cost is the initial cost of an asset minus its residual value.

Question 13

If a fixed asset,such as a computer,were purchased on January 1 for $3,750 with an estimated life of 3 years and a salvage or residual value of $150,the journal entry for monthly expense under straight-line depreciation is

Accepted Answer

The answer of If a fixed asset,such as a computer,were...

Question 14

A machine with a cost of $120,000 has an estimated residual value of $15,000 and an estimated life of 5 years or 15,000 hours.It is to be depreciated by the units-of-output method.What is the amount of depreciation for the second full year,during which the machine was used 5,000 hours?

Accepted Answer

The units-of-output method calculates depreciation based on usage. The total depreciable amount is $120,000 - $15,000 = $105,000. The depreciation per hour is $105,000 / 15,000 hours = $7 per hour. For 5,000 hours, the depreciation is 5,000 hours * $7/hour = $35,000.

Question 15

An asset was purchased for $120,000 on January 1,Year 1 and originally estimated to have a useful life of 10 years with a residual value of $10,000.At the beginning of the third year,it was determined that the remaining useful life of the asset was only 4 years with a residual value of $2,000.Calculate the third-year depreciation expense using the revised amounts and straight-line method.

Accepted Answer

The third-year depreciation expense is calculated as follows:Depreciation expense = (Cost - Residual value) / Useful life= (120,000 - 2,000) / 4= 24,000

Question 16

On June 1,Aaron Company purchased equipment at a cost of $120,000 that has a depreciable cost of $90,000 and an estimated useful life of 3 years and 30,000 hours. Using straight-line depreciation,calculate depreciation expense for the final partial year of service.

Accepted Answer

The straight-line depreciation expense per year is $30,000 ($90,000 / 3 years). For the final partial year, assuming the equipment is used for a full year, the depreciation expense would be $30,000. However, if the equipment is used for only a partial year, the expense would be prorated based on the number of months used. Since the equipment was purchased on June 1, it would be used for 7 months in the final year (June to December), resulting in a depreciation expense of $12,500 ($30,000 * 7/12).

Question 17

The calculation for annual depreciation using the units-of-output method is

Accepted Answer

The units-of-output method calculates depreciation based on the actual output of the asset in a given year. The formula for annual depreciation using this method is Depreciable cost / Estimated output × Actual yearly output. This takes into account the depreciation of an asset based on how much it has been used over a given period of time.

Question 18

The accumulated depletion account is

Accepted Answer

The accumulated depletion account is a contra-asset account that is reported on the balance sheet as a deduction from the cost of the mineral deposit. It represents the portion of the asset that has been consumed or extracted over time. It is not an expense account or an intangible asset account and is not reported on the income statement.

Question 19

Expected useful life is

Accepted Answer

Expected useful life is estimated at the time that the asset is placed in service. This estimate is used to calculate the depreciation expense over the useful life of the asset.

Question 20

Computer equipment was acquired at the beginning of the year at a cost of $57,000 that has an estimated residual value of $9,000 and an estimated useful life of 5 years.Determine the second-year depreciation using the straight- line method.

Accepted Answer

Using the straight-line method, the annual depreciation is calculated as follows:

Depreciation expense = (Cost - Residual value) / Useful life

Depreciation expense = ($57,000 - $9,000) / 5 years = $9,600 per year

To determine the second-year depreciation, we simply need to subtract the first-year depreciation from the total depreciation expense:

Second-year depreciation = Depreciation expense - First-year depreciation

Second-year depreciation = $9,600 - $9,600 = $9,600

Therefore, the correct answer is D) $9,600.

Quiz 9: Fixed Assets and Intangible Assets