Baruch College, CUNY

ACC 2101

1)The factors that need to be determined to compute depreciation are an asset's:

 

 

2. The depreciable base for an asset is:

 

 

3. Depreciation, depletion, and amortization:

 

 

4. Gains on the cash sales of fixed assets:

 

 

5. The overriding principle for all depreciation methods is that the method must be:

 

 

 

 

 

6. Depreciation:

 

 

 

7. Assuming an asset is used evenly over a four-year service life, which method of depreciation will always result in the largest amount of depreciation in the first year?

 

 

 

8. In the first year of an asset's life, which of the following methods has the smallest depreciation?

 

 

 

 

9. An asset acquired January 1, 2016, for $15,000 with an estimated 10-year life and no residual value is being depreciated in an equipment group asset account that has an average service life of eight years. The asset is sold on December 31, 2017, for $6,000. The entry to record the sale would be:

 

 

 

 

Use the following to answer questions

 

Cutter Enterprises purchased equipment for $72,000 on January 1, 2016. The equipment is expected to have a five-year life and a residual value of $6,000.

 

10. Using the straight-line method, depreciation for 2016 would be:

 

 

 

11. Using the straight-line method, the book value at December 31, 2016, would be:
12. Using the straight-line method, depreciation for 2017 and the equipment’s book value at December 31, 2017, would be:

 

13. Using the double-declining balance method, depreciation for 2016 and the book value at December 31, 2016, would be:

 

 

 

14. Using the double-declining balance method, depreciation for 2017 would be:

 

 

15. Using the double-declining balance method, the book value at December 31, 2017, would be:

 

 

 

16. Using the sum-of-the-years'-digits method, depreciation for 2016 and book value at December 31, 2016, would be:

 

 

 

 

17. Using the sum-of-the-years'-digits method, depreciation for 2017 and book value at December 31, 2017, would be:

Use the following to answer questions:

 

On June 30, 2016, Prego Equipment purchased a precision laser-guided steel punch that has an expected capacity of 300,000 units and no residual value. The cost of the machine was $450,000 and is to be depreciated using the units-of-production method. During the six months of 2016, 24,000 units of product were produced. At the beginning of 2017, engineers estimated that the machine can realistically be used to produce only another 230,000 units. During 2017, 70,000 units were produced.

 

18. Prego would report depreciation in 2016 of:

 

 

 

 

19. Prego would report depreciation in 2017 of:

 

 

Use the following to answer questions

 

Archie Co. purchased a framing machine for $45,000 on January 1, 2016. The machine is expected to have a four-year life, with a residual value of $5,000 at the end of four years.

 

 

20. Using the straight-line method, depreciation for 2016 and book value at December 31, 2016, would be:

 

 

 

 

21. Using the straight-line method, depreciation for 2017 and book value at December 31, 2017, would be:

 

 

 

 

22. Using the double-declining balance method, depreciation for 2016 and book value at December 31, 2016, would be:

 

 

 

 

23. Using the double-declining balance method, depreciation for 2017 and book value at December 31, 2017, would be:

 

24. Using the sum-of-the-years'-digits method, depreciation for 2016 and book value at December 31, 2016, would be:

 

 

 

 

25. Using the sum-of-the years'-digits method, depreciation for 2017 and book value at December 31, 2017, would be

 

 

 

Use the following to answer questions:

 

On September 30, 2016, Bricker Enterprises purchased a machine for $200,000. The estimated service life is 10 years with a $20,000 residual value. Bricker records partial-year depreciation based on the number of months in service.

 

26. Depreciation for 2016, using the straight-line method is:

 

 

27. Depreciation for 2016, using double-declining balance, would be

 

 

 

 

28. Depreciation for 2017, using double-declining balance, would be:

 

 

29. Depreciation (to the nearest dollar) for 2016, using sum-of-the-years' digits, would be:

 

 

30. Depreciation (to the nearest dollar) for 2017, using sum-of-the-years' digits, would be

 

 

 

 

31. Jennings Advertising Inc. reported the following in its December 31, 2016, balance sheet: Equipment                                                                                               $500,000

Less: Accumulated depreciation—equipment   $135,000

 

In a disclosure note, Jennings indicates that it uses straight-line depreciation over 10 years and estimates salvage value at 10% of cost. What is the average age of the equipment owned by Jennings?

 

 

 

32. Gulf Consulting Co. reported the following on its December 31, 2016, balance sheet: Equipment (at cost)…..$700,000

 

In a disclosure note, Gulf indicates that it uses straight-line depreciation over five years and estimates salvage value as 10% of cost. Gulf's equipment averages 3.5 years at December 31, 2016. What is the book value of Gulf's equipment at December 31, 2016?

 

 

 

 

33. Asset C3PO has a depreciable base of $16.5 million and a service life of 10 years. What would the accumulated depreciation be at the end of year five under the sum-of-the-years' digits method?

 

 

Use the following to answer questions 55 and 56:

 

On March 31, 2016, M. Belotti purchased the right to remove gravel from an old rock quarry. The gravel is to be sold as roadbed for highway construction. The cost of the quarry rights was

$164,000, with estimated salable rock of 20,000 tons. During 2016, Belotti loaded and sold 4,000 tons of rock and estimated that 16,000 tons remained at December 31, 2016. At January 1, 2017, Belotti estimated that 20,000 tons still remained. During 2017, Belotti loaded and sold 8,000 tons.

 

34. Belotti would record depletion in 2016 of: b.      $32,800.

 

 

35. Belotti would record depletion in 2017 of: c.       $52,480.

 

36. The legal life of a patent is:

 

 

 

37. Short Corporation acquired Hathaway, Inc., for $52,000,000. The fair value of all Hathaway’s identifiable tangible and intangible assets was $48,000,000. Short will amortize any goodwill over the maximum number of years allowed. What is the annual amortization of goodwill for this acquisition?

 

 

 

38. Granite Enterprises acquired a patent from Southern Research Corporation on January 1, 2016, for $4 million. The patent will be used for 5 years, even though its legal life is 20 years. Rocky Corporation has made a commitment to purchase the patent from Granite for $200,000 at the end of five years. Compute Granite's patent amortization for 2016, assuming the straight-line method is used.

 

 

39. In January 2016, Vega Corporation purchased a patent at a cost of $200,000. Legal and filing fees of $50,000 were paid to acquire the patent. The company estimated a 10-year useful life for the patent and uses the straight-line amortization method for all intangible assets. In January, 2019, Vega spent $40,000 in legal fees for an unsuccessful defense of the patent and the patent is no longer usable. The amount charged to income (expense and loss) in 2019 related to the patent should be:

 

 

 

 

40. Accounting for a change in the estimated service life of equipment:

 

 

41. A change in the estimated useful life and residual value of machinery in the current year is handled as:

 

 

 

42. Nanki Corporation purchased equipment on January 1, 2014, for $650,000. In 2014 and 2015, Nanki depreciated the asset on a straight-line basis with an estimated useful life of eight years and a $10,000 residual value. In 2016, due to changes in technology, Nanki revised the useful life to a total of six years with no residual value. What depreciation would Nanki record for the year 2016 on this equipment?

 

 

43. Fellingham Corporation purchased equipment on January 1, 2014, for $200,000. The company estimated the equipment would have a useful life of 10 years with a $20,000 residual value. Fellingham uses the straight-line depreciation method. Early in 2016, Fellingham reassessed the equipment's condition and determined that its total useful life would be only six years in total and that it would have no salvage value. How much would Fellingham report as depreciation on this equipment for 2016?

 

44. A change from the straight-line method to the sum-of-years'-digits method of depreciation is handled as:

 

45. Murgatroyd Co. purchased equipment on January 1, 2014, for $500,000, estimating a four-year useful life and no residual value. In 2014 and 2015, Murgatroyd depreciated the asset using the sum-of-years'-digits method. In 2016, Murgatroyd changed to straight-line depreciation for this equipment. What depreciation would Murgatroyd record for the year 2016 on this equipment?

 

 

 

46. Broadway Ltd. purchased equipment on January 1, 2014, for $800,000, estimating a five- year useful life and no residual value. In 2014 and 2015, Broadway depreciated the asset using the straight-line method. In 2016, Broadway changed to sum-of-years'-digits depreciation for this equipment. What depreciation would Broadway record for the year 2016 on this equipment?

 

 

 

47. On January 1, 2014, Al's Sporting Goods purchased store fixtures at a cost of $180,000. The anticipated service life was 10 years with no residual value. Al's has been using the double-declining balance method, but in 2016 adopted the straight-line method because the company believes it provides a better measure of income. Al's has a December 31 year-end. The journal entry to record depreciation for 2016 is:

 

 

 

 

 

48. An asset should be written down if there has been an impairment of value that is:

 

 

 

 

 

49. Recognition of impairment for property, plant, and equipment is required if book value exceeds:

 

 

50. The amount of impairment loss is the excess of book value over:

 

 

 

 

51. Accounting for impairment losses:

 

 

 

 

 

 

52. In testing for recoverability of property, plant, and equipment, an impairment loss is

required if the:

 

 

 

53. At the end of its 2016 fiscal year, a triggering event caused Janero Corporation to perform an impairment test for one of its manufacturing facilities. The following information is available:

Book value                                                                                                  $65 million

Estimated undiscounted future cash flows                                      60 million

Fair value                                                                                                        50 million

 

The manufacturing facility is:

 

 

 

 

54. Fryer Inc. owns equipment for which it paid $90 million. At the end of 2016, it had accumulated depreciation on the equipment of $27 million. Due to adverse economic conditions, Fryer's management determined that it should assess whether an impairment loss should be recognized for the equipment. The estimated undiscounted future cash flows to be provided by the equipment total $60 million, and the equipment’s fair value at that point is $40 million. Under these circumstances, Fryer:

 

 

 

 

 

55. Wilson Inc. owns equipment for which it paid $70 million. At the end of 2016, it had accumulated depreciation on the equipment of $12 million. Due to adverse economic conditions, Wilson's management determined that it should assess whether an impairment loss should be recognized for the equipment. The estimated undiscounted future cash flows to be provided by the equipment total $60 million, and the equipment’s fair value at that point is $50 million. Under these circumstances, Wilson:

 

 

 

 

56. Jung Inc. owns a patent for which it paid $66 million. At the end of 2016, it had accumulated amortization on the patent of $16 million. Due to adverse economic conditions, Jung's management determined that it should assess whether an impairment loss should be recognized for the patent. The estimated undiscounted future cash flows to be provided by the patent total $43 million, and the patent’s fair value at that point is $35 million. Under these circumstances, Lester:
    1. Would record no impairment loss on the patent.
    2. Would record a $7 million impairment loss on the patent.
    3. Would record a $15 million impairment loss on the patent.
    4. Would record a $31 million impairment loss on the patent.

 

 

57. In 2015, Antle Inc. had acquired Demski Co. and recorded goodwill of $245 million as a result. The net assets (including goodwill) from Antle's acquisition of Demski Co. had a 2016 year-end book value of $580 million. Antle assessed the fair value of Demski at this date to be $700 million, while the fair value of all of Demski’s identifiable tangible and intangible assets (excluding goodwill) was $550 million. The amount of the impairment loss that Antle would record for goodwill at the end of 2016 is:
    1. $150 million.
    2. $ 95 million.

c.     $0.

d.     None of these answer choices are correct.

 

 

 

 

 

58. Which of the following types of subsequent expenditures normally is capitalized?
    1. Additions.
    2. Improvements.
    3. Rearrangements.

b. All of these answer choices are normally capitalized.

 

 

 

 

 

 

 

59. A major expenditure increased a truck's life beyond the original estimate of life. GAAP permits the expenditure to be debited to:

 

 

 

 

60. The replacement of a major component increased the productive capacity of production equipment from 10 units per hour to 18 units per hour. The expenditure should be debited to:

 

 

 

 

61. Calloway Shoes purchased a delivery truck on September 30, 2016, for $32,000. The estimated useful life of the truck is 10 years with no residual value. After five years, the refrigeration unit will need to be replaced. The $8,000 cost of the unit is included in the cost of the truck. Calloway uses the straight-line depreciation method. Depreciation for 2016 under U.S. GAAP and International Financial Reporting Standards (IFRS), respectively, is:

 

IFRS

U.S. GAAP

 

 

 

 

 

 

62. Robertson Inc. prepares its financial statements according to International Financial Reporting Standards (IFRS). At the end of its 2016 fiscal year, the company chooses to revalue its equipment. The equipment cost $540,000, had accumulated depreciation of

$240,000 at the end of the year after recording annual depreciation, and had a fair value of $330,000. After the revaluation, the accumulated depreciation account will have a

balance of:

 

 

 

63. Rice Industries owns a manufacturing plant in a foreign country. Political unrest in the country indicates that Rice should investigate for possible impairment. Below is information related to the plant’s assets ($ in millions):

Book value                                                                                                    $190

Undiscounted sum of future estimated cash flows                        210

Present value of future cash flows                                                        175

Fair value less cost to sell (determined by appraisal)                     180

The amount of impairment loss that Rice should recognize according to U.S. GAAP and IFRS, respectively, is:

 

U.S. GAAP	IFRS

 

2. $0.                              $10 million.

 

 

 

 

64. Kingston Corporation has $95 million of goodwill on its books from the 2014 acquisition of Reliant Motors. At the end of its 2016 fiscal year, management has provided the following information for its required goodwill impairment test ($ in millions):

 

Fair value of Reliant (approximates fair value less costs to sell)	$655
Fair value of Reliant’s net assets (excluding goodwill)	600
Book value of Reliant’s net assets (including goodwill)	700
Present value of estimated future cash flows	670

 

Assuming that Reliant is considered a reporting unit for U.S. GAAP and a cash- generating unit for IFRS, the amount of goodwill impairment loss that Kingston should recognize according to U.S. GAAP and IFRS, respectively, is:

 

IFRS

U.S. GAAP

 

 

 

 

 

65. According to International Financial Reporting Standards (IFRS), the revaluation of equipment when fair value exceeds book value, results in:

 

 

 

66. According to International Financial Reporting Standards (IFRS), biological assets are valued at:

 

 

 

67. According to International Financial Reporting Standards (IFRS), the impairment loss for property, plant, and equipment is the difference between book value and:

 

 

 

 

 

 

 

68. According to International Financial Reporting Standards (IFRS), the level of testing for goodwill impairment is the:

 

69. The normal treatment of litigation costs to successfully defend an intangible right under

U.S. GAAP and International Financial Reporting Standards (IFRS), respectively, is:

 

 

70. Canliss Mining uses the retirement method to determine depreciation on its office equipment. During 2014, its first year of operations, office equipment was purchased at a cost of $14,000. Useful life of the equipment averages four years and no salvage value is anticipated. In 2016, equipment costing $5,000 was sold for $600 and replaced with new equipment costing $6,000. Canliss would record 2016 depreciation of:

 

71. Canliss Mining uses the replacement method to determine depreciation on its office equipment. During 2014, its first year of operations, office equipment was purchased at a cost of $14,000. Useful life of the equipment averages four years and no salvage value is anticipated. In 2016, equipment costing $5,000 was sold for $600 and replaced with new equipment costing $6,000. Canliss would record 2016 depreciation of: