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Homework answers / question archive / Columbia College ACCT 383 True/False Questions 1)The three factors in cost allocation of a depreciable asset are service life, the allocation base, and the allocation method

Columbia College ACCT 383 True/False Questions 1)The three factors in cost allocation of a depreciable asset are service life, the allocation base, and the allocation method

Accounting

Columbia College

ACCT 383

True/False Questions

1)The three factors in cost allocation of a depreciable asset are service life, the allocation base, and the allocation method.

 

 

 

  1. The physical life of a depreciable asset sets the lower limit of its service life.

 

 

 

  1. Any method of depreciation must be both systematic and rational.

 

 

 

  1. Advocates of accelerated depreciation methods argue that their use tends to level out the total cost of ownership of an asset over its benefit period if one considers both depreciation and repair and maintenance costs.

 

 

 

  1. Total depreciation is the same over the life of an asset regardless of the method of depreciation used.

 

 

 

  1. Activity-based methods of depreciation are appropriate for assets whose service life is a function of use rather than time.

 

 

 

  1. Once selected for existing assets, a company must consistently use the same method of depreciation for all subsequent fixed asset acquisitions.

 

 

 

  1. The use of group and composite depreciation methods is an example of the application of the cost effectiveness and materiality constraints.

 

 

 

  1. A change in the estimated recoverable units used to compute depletion requires retroactive adjustments to the financial statements.

 

 

 

  1. Statutory depletion is the maximum amount of depletion expense that may be reported in financial statements prepared according to GAAP.

 

 

 

 

  1. One of the advantages of group and composite methods is that gains and losses on the disposal of individual assets need not be computed.

 

 

 

  1. Changes in the estimates involved in depreciation, depletion, and amortization require retroactive restatement of financial statements.

 

 

 

 

Matching Pair Questions

 

 

Use the following to answer questions 13-17:

 

 

13-17. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term placing the letter designating the best term in the space provided by the phrase.

 

Terms:

  1. Activity-based method
  2. Book value
  3. Composite method
  4. Date placed in service
  5. Double-declining balance
  6. Improvements
  7. Involuntary conversions
  8. Percentage depletion
  9. Straight-line method
  10. Write-down of asset

Phrases:

  1.              Occurs with a significant decline in value.
  2.              Estimates service life in units of output.
  3.              Does not subtract residual value from cost.
  4.              Aggregates assets that are physically dissimilar.
  5.              Produces a level amount of annual depreciation.

 

 

 

Use the following to answer questions 18-22:

 

18-22. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term placing the letter designating the best term in the space provided by the phrase.

 

Terms:

  1. Activity-based method
  2. Book value
  3. Composite method
  4. Date placed in service
  5. Double-declining balance
  6. Improvements
  7. Involuntary conversions
  8. Percentage depletion
  9. Straight-line method
  10. Write-down of asset

Phrases:

  1.              Only used for tax purposes.
  2.              Cost less accumulated depreciation.
  3.              Three methods are employed to record these costs.
  4.              Recorded like any other asset disposition.
  5.              Triggers commencement of depreciation.

 

 

Use the following to answer questions 23-27:

 

23-27. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term by placing the letter designating the best term in the space provided by the phrase.

 

Terms:

  1. Accelerated methods
  2. Amortization
  3. Change in depreciation method
  4. Change in useful life
  5. Depletion
  6. Depreciable base
  7. Depreciation expense
  8. Prior period adjustment
  9. Repairs and maintenance
  10. Service life

Phrases:

  1.              Cost allocation of natural resources.
  2.              Amount of use expected from an operational asset.
  3.              Cost less residual value.
  4.              Treated prospectively like a change in estimate
  5.              Cost allocation of intangible assets.

 

 

 

Use the following to answer questions 28-32:

 

28-32. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term by placing the letter designating the best term in the space provided by the phrase.

 

Terms:

  1. Accelerated methods
  2. Amortization
  3. Change in depreciation method
  4. Change in useful life
  5. Depletion
  6. Depreciable base
  7. Depreciation expense
  8. Prior period adjustment
  9. Repairs and maintenance
  10. Service life

Phrases:

  1.              Generate annually declining amounts of depreciation.
  2.              Usually different amounts for financial reporting and tax purposes.
  3.              Expenditures made to maintain a given level of benefits from an asset.
  4.              Results from subsequent year correction of an error in accounting for operational assets.
  5.              Is a change in accounting estimate.

 

 

Use the following to answer questions 33-37:

 

33-37. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term placing the letter designating the best term in the space provided by the phrase.

 

Terms:

  1. Additions
  2. Cost of defending intangible rights
  3. Depreciation
  4. Group method
  5. Impairment
  6. Indefinite life
  7. Rearrangements
  8. Residual value
  9. Sum-of-the-years'-digits method
  10. Time-based method

Phrases:

  1.              The basis for not amortizing goodwill.
  2.              Cost allocation of plant and equipment.
  3.              Aggregates assets that are similar.
  4.              Estimates service life in years.
  5.              Results in depreciation declining by the same amount in each subsequent year.

 

 

 

Use the following to answer questions 38-42:

 

38-42. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term placing the letter designating the best term in the space provided by the phrase.

 

Terms:

  1. Additions
  2. Cost of defending intangible rights
  3. Depreciation
  4. Group method
  5. Impairment
  6. Indefinite life
  7. Rearrangements
  8. Residual value
  9. Sum-of-the-years'-digits method
  10. Time-based method

Phrases:

  1.              Estimate of recoverable cost at end of an asset's life.
  2.              Should be capitalized since they provide future benefits.
  3.              Capitalize unless unsuccessful.
  4.              Considered if indicated that book value may not be recoverable.
  5.              Should be expensed unless they are material and provide a future benefit.

 

 

 

Multiple Choice Questions

 

  1. The factors that need to be known to compute depreciation are an asset's:
    1. Cost, residual value, and physical life.
    2. Cost, replacement value, and service life.
    3. Fair market value, residual value, and economic life.
    4. Cost, residual value, and service life.

 

 

 

  1. The depreciable base for an asset is:
    1. Its service life.
    2. The excess of its cost over residual value.
    3. The difference between its replacement value and cost.
    4. The amount allowable under MACRS

 

 

 

 

  1. 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 expense in the first year?
    1. Straight-line.
    2. Units of production.
    3. Double-declining balance.
    4. Sum-of-the-year's digits.

 

 

 

  1. Depreciation, depletion, and amortization:
    1. All refer to the process of allocating the cost of operational assets among future benefit periods.
    2. All generally utilize the same methods of cost allocation.
    3. Are all handled the same in arriving at taxable income.
    4. All of the above are correct.

 

 

 

  1. Depreciation:
    1. Is always considered a period cost.
    2. Could be a product cost or a period cost depending on the use of the asset.
    3. Is usually based on the declining balance method.
    4. Per books is usually higher than MACRS in the early years of an asset's life.

 

                         

 

  1. Gains on the cash sales of fixed assets:
    1. Are the excess of the carrying value over the cash proceeds.
    2. Are part of cash flows from operations.
    3. Are reported on a net-of-tax basis if material.
    4. Are the excess of the cash received over the book value of the assets.

 

 

 

  1. Accounting for a change in the estimated service life of equipment:
    1. Is handled prospectively.
    2. Requires retroactive restatement of prior year's financial statements.
    3. Requires a prior period adjustment.
    4. Is handled currently as a change in accounting principle.

 

                         

 

  1. The overriding principles for all depreciation methods is that the method must be:
    1. Conservative and economic.
    2. Systematic and rational.
    3. Consistent and conservative.
    4. Significant and material.

 

                         

 

 

  1. The legal life of a patent is:
    1. Forty years.
    2. Twenty years.
    3. Life of the inventor plus fifty years.
    4. Indefinite.

 

                         

 

  1. In the first year of an asset's life, which of the following methods has the smallest depreciation?
    1. Straight-line.
    2. Declining balance.
    3. Sum-of-the-years' digits.
    4. Composite or group.

 

                         

 

  1. An operational asset should be written down if there has been an impairment of value that is:
    1. Relevant and objectively determined.
    2. Material and market driven.
    3. Unplanned and sudden.
    4. Significant.

 

 

 

  1. Recognition of impairment for tangible operational assets is required if book value exceeds:
    1. Market value.
    2. Present value of expected cash flows.
    3. Undiscounted expected cash flows.
    4. Accumulated depreciation.

 

                         

 

  1. The amount of impairment loss is the excess of book value over:
    1. Carrying value.
    2. Undiscounted future cash flows.
    3. Market value.
    4. Future revenues.

 

                         

 

 

  1. A major expenditure increased a truck's life beyond the original life. GAAP permits the expenditure to be debited to:
    1. Repairs.
    2. Accumulated depreciation.
    3. Major repairs.
    4. None of the above.

 

                         

 

  1. The replacement of a major component increased the productive capacity of a production equipment from 10 units per hour to 18 units per hour. The expenditure should be debited to:
    1. Repairs.
    2. Equipment.
    3. Maintenance.
    4. Gain from repairs.

 

                         

 

  1. Accounting for impairment losses:
    1. Involves a two-step process for recoverability and measurement.
    2. Applies only to depreciable, operational assets.
    3. Applies only to assets with finite lives.
    4. All of the above are correct.

 

                         

 

  1. A change in the estimated useful life and residual value of machinery in the current year is handled as:
    1. A retrospective change back to the date of acquisition as though the current estimated life and residual value had been used all along.
    2. A prospective change from the current year through the remainder of its useful life, using the new estimates.
    3. A cumulative adjustment to income in the current year for the difference in depreciation under the new vs. old estimates.
    4. None of the above is correct.

 

                         

 

  1. In testing for recoverability of an operational asset, an impairment loss is:
    1. Required if the asset's book value exceeds the present value of its expected future cash flows.
    2. Required if the undiscounted sum of its expected future cash flows exceeds the asset's book value.
    3. Present value of expected future cash flows exceeds its carrying value.
    4. Its carrying value exceeds the undiscounted sum of expected future cash flows.

 

 

 

 

  1. A change from the straight-line method to the sum-of-years'-digits method of depreciation is handled as:
    1. A retrospective change back to the date of acquisition as though the current estimated life had been used all along.
    2. A cumulative adjustment to income in the current year for the difference in depreciation under the new vs. old useful life estimate.
    3. A prospective change from the current year through the remainder of its useful life.
    4. None of the above is correct.

 

                         

 

  1. Fryer Inc. owns equipment for which it paid $90 million. At the end of 2006, it had accumulated depreciation charges on the equipment of $27 million. Due to adverse economic conditions, Fryer's management determined that it should assess whether an impairment should be recognized for the equipment. The estimated future cash flows (without discounting) to be provided by the equipment total $60 million, and its fair value at that point totals $40 million. Under these circumstances, Fryer:
    1. Would record no impairment loss on the equipment.
    2. Would record a $3 million impairment loss on the equipment.
    3. Would record a $23 million impairment loss on the equipment.
    4. None of the above is correct.

 

                         

 

  1. Wilson Inc. owns equipment for which it paid $70 million. At the end of 2006, it had accumulated depreciation charges on the equipment of $12 million. Due to adverse economic conditions, Wilson's management determined that it should assess whether an impairment should be recognized for the equipment. The estimated future cash flows (without discounting) to be provided by the equipment total $60 million, and its fair value at that point totals $50 million. Under these circumstances, Wilson:
    1. Would record no impairment loss on the equipment.
    2. Would record an $8 million impairment loss on the equipment.
    3. Would record a $20 million impairment loss on the equipment.
    4. None of the above is correct.

 

                         

 

 

  1. Jung Inc. owns a patent for which it paid $66 million. At the end of 2006, it had accumulated amortization charges on the patent of $16 million. Due to adverse economic conditions, Jung's management determined that it should assess whether an impairment should be recognized for the patent. The estimated future cash flows (without discounting) to be provided by the patent total $43 million, and its fair value at that point totals $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.

 

                         

 

 

  1. In 2005, 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 2006 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 (excluding goodwill) was $550 million. The amount of the impairment loss that Antle would record for goodwill at the end of 2006 is.

    1. $150 million
    2. $95 million
    3. $0
    4. None of the above is correct.

 

 

 

 

  1. Nanki Corporation purchased equipment on 1/1/04 for $650,000. In 2004 and 2005, Nanki depreciated the asset on a straight-line basis with an estimated useful life of 8 years and a

$10,000 residual value. In 2006, due to changes in technology, Nanki revised the useful life to a total of six years with zero residual value. What depreciation expense would Nanki charge for the year 2006 on this equipment?

A) $108,333

B)   $106,667

C)   $122,500

D) None of the above is correct.

 

                         

 

 

  1. Murgatroyd Co. purchased equipment on 1/1/04 for $500,000, estimating a four-year useful life and no residual value. In 2004 and 2005, Murgatroyd depreciated the asset using the sum- of-years'-digits method. In 2006, Murgatroyd changed to straight-line depreciation for this equipment. What depreciation expense would Murgatroyd charge for the year 2006 on this equipment?

A) $75,000

B)   $125,000

C)   $150,000

D) None of the above is correct.

 

                         

 

  1. Broadway Ltd. purchased equipment on 1/1/04 for $800,000, estimating a five-year useful life and no residual value. In 2004 and 2005, Broadway depreciated the asset using the straight- line method. In 2006, Broadway changed to sum-of-years'-digits (SYD) depreciation for this equipment. What depreciation expense would Broadway charge for the year 2006 on this equipment?

A) $120,000

B)   $160,000

C)   $200,000

D) $240,000

 

 

 

Use the following to answer questions 69-76:

 

 

Cutter Enterprises purchased equipment for $72,000 on January 1, 2006. The equipment is expected to have a five-year life, with a residual value of $6,000 at the end of five years.

 

  1. Using the straight-line method, depreciation expense for 2006 would be: A) $13,200

B)   $14,400

C)   $72,000

D) None of the above is correct.

 

                         

 

 

  1. Using the straight-line method, the book value at December 31, 2006 would be: A) $57,600.

B)   $51,600.

C)   $58,800.

D) $52,800.

 

                         

 

  1. Using the straight-line method, depreciation expense for 2007 and the equipment book value at December 31, 2007 would be:

A) $14,400 and $43,200.

B)  $28,800 and $37,200.

C) $13,200 and $39,600.

D) $13,200 and $45,600.

 

 

 

  1. Using the double-declining balance method, depreciation expense for 2006 and the book value at December 31, 2006 would be:

A) $26,400 and $45,600.

B)  $28,800 and $43,200.

C) $28,800 and $37,200.

D) $26,400 and $36,600.

 

                         

 

 

 

  1. Using the double-declining balance method, depreciation expense for 2007 would be: A) $28,800.

B)   $18,240.

C)   $17,280.

D) None of the above is correct.

 

                         

 

 

  1. Using the double-declining balance method, the book value at December 31, 2007 would be: A) $14,400.

B)   $24,960.

C)   $27,360.

D) $25,920.

 

 

 

  1. Using the sum-of-the-years'-digits method, depreciation expense for 2006 and book value at December 31, 2006 would be:

A) $22,000 and $44,000.

B)  $22,000 and $50,000.

C) $24,000 and $48,000.

D) $24,000 and $42,000.

 

                         

 

  1. Using the sum-of-the-years'-digits method, depreciation expense for 2007 and book value at December 31, 2007 would be:

A) $19,200 and $22,800.

B)  $17,600 and $26,400.

C) $19,200 and $28,800.

D) $17,600 and $32,400.

 

 

 

Use the following to answer questions 77-78:

 

On March 31, 2006, M. Belotti purchased an old rock quarry for the gravel which is to be sold as roadbed for highway construction. The cost of the quarry was $164,000, with estimated salable rock of 20,000 tons. During 2006, Belotti loaded and sold 4,000 tons of rock and estimated that 16,000 tons remained at December 31, 2006. During 2007, Belotti loaded and sold 8,000 tons, but estimated at December 31, 2007, that 12,000 tons remained. Belotti expects that the costs of restoring the land after all gravel has been removed will equal the land's fair value at that time.

 

  1. Belotti would record depletion expense in 2006 of: A) $41,000.

B)   $32,800.

C)   $30,750.

D) $24,600.

 

                         

 

 

  1. Belotti would record depletion expense in 2007 of: A) $54,667.

B)   $65,600.

C)   $52,480.

D) $55,760.

 

                         

 

Use the following to answer questions 79-80:

 

On June 30, 2006, Prego Equipment purchased a precision laser-guided steel punch that has an expected capacity of 300,000 units and has no residual value. The cost of the machine was $450,000 and is to be depreciated using the units-of-production method. During six months of 2006, 24,000 units of product were produced. During 2007, 70,000 units were produced. At the end of 2007, engineers estimated that the machine can realistically be used to produce only another 160,000 units.

 

  1. Prego would report depreciation expense in 2006 of: A) $36,000.

B)   $43,900.

C)   $18,000.

D) $21,950.

 

                         

 

  1. Prego would report depreciation expense in 2007 of: A) $135,230.

B)   $126,000.

C)   $108,000.

D) $105,000.

 

                         

 

 

Use the following to answer questions 81-86:

 

Archie Co. purchased a framing machine for $45,000 on January 1, 2006. The machine is expected to have a four-year life, with a residual value of $5,000 at the end of four years.

 

 

  1. Using the straight-line method, depreciation expense for 2006 and book value at December 31, 2006, would be:

A) $10,000 and $30,000.

B)   $11,250 and $28,750.

C) $10,000 and $35,000.

D) $11,250 and $33,750.

 

                         

 

  1. Using the straight-line method, depreciation expense for 2007 and book value at December 31, 2007, would be:

A) $10,000 and $20,000.

B)  $10,000 and $25,000.

C) $11,250 and $17,500.

D) $11,250 and $22,500.

 

                         

 

  1. Using the double-declining balance method, depreciation expense for 2006 and book value at December 31, 2006, would be:

A) $22,500 and $22,500.

B) $22,500 and $17,500.

C) $20,000 and $25,000.

D) $20,000 and $20,000.

 

                         

 

  1. Using the double-declining balance method, depreciation expense for 2007 and book value at December 31, 2007, would be:

A) $10,000 and $5,000.

B) $10,000 and $10,000.

C) $11,250 and $6,250.

D) $11,250 and $11,250.

 

 

 

 

  1. Using the sum-of-the-years'-digits method, depreciation expense for 2006 and book value at December 31, 2006 would be:

A) $18,000 and $27,000.

B)  $16,000 and $29,000.

C) $16,000 and $24,000.

D) $18,000 and $22,000.

 

                         

 

  1. Using the sum-of-the years'-digits method, depreciation expense for 2007 and book value at December 31, 2007, would be

A) $13,500 and $13,500.

B) $13,500 and $8,500.

C) $12,000 and $17,000.

D) $12,000 and $12,000.

 

                         

 

  1. An asset acquired January 1, 2006, for $15,000 with an estimated ten-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, 2007, for $6,000. The entry to record the sale would be:

 

A)     Cash

Loss on sale of equipment

6,000

 

9,000

Equipment

 

15,000

B)      Cash

6,000

 

Equipment

 

6,000

C)      Cash

6,000

 

Accumulated depreciation

3,750

 

Loss on sale of equipment

5,250

 

Equipment

 

15,000

D)     Cash

6,000

 

Accumulated depreciation

9,000

 

Equipment

 

15,000

 

 

 

 

Use the following to answer questions 88-92:

 

Bricker Enterprises purchased a machine for $200,000 on September 30, 2006. The estimated service life is ten years with a $20,000 residual value. Bricker records partial-year depreciation based on the number of months in service.

 

  1. Depreciation expense for 2006, using straight-line, is: A) $13,500.

B) $15,000.

C)   $ 4,500.

D) $ 5,000.

 

                         

 

  1. Depreciation expense for 2006, using double-declining balance, would be: A) $40,000.

B)   $10,000.

C)   $36,000.

D) $ 9,000.

 

                         

 

  1. Depreciation expense for 2007, using double-declining balance, would be: A) $32,000.

B)   $34,000.

C)   $38,000.

D) $40,000.

 

                         

 

  1. Depreciation expense (to the nearest dollar) for 2006, using sum-of-the-years' digits, would be:

A) $ 9,091.

B)   $24,545.

C)   $27,273.

D) $ 8,182.

 

 

 

 

  1. Depreciation expense (to the nearest dollar) for 2007, using sum-of-the-years' digits, would be:

A) $31,909.

B)   $29,455.

C)   $35,456.

D) $18,000.

 

                         

 

  1. Al's Sporting Goods purchased store fixtures on January 1, 2004, at a cost of $180,000. The anticipated service life was ten years, with negligible residual value. Al's has been using the double-declining balance method, but in 2006 adopted the straight-line method because the company believes it is a better measure of income. Al's has a December 31 year-end. Ignoring income taxes, the journal entry to record depreciation for 2006 is:

A)     Depreciation expense

23,040

 

Accumulated depreciation

 

23,040

B)      Depreciation expense

14,400

 

Accumulated depreciation

 

14,400

C)      Accumulated depreciation

28,800

 

Cumulative effect of accounting

 

28,800

change

 

 

D)     No entry

 

 

 

                         

 

 

 

  1. In 2006, Sage Company discovered that a building addition completed December 30, 2003, at a cost of $360,000 was charged to building and maintenance expense in error. The cost should have been charged to the building account. At December 31, 2006, the building addition had 22 years of life remaining and a $100,000 residual value. The entry that should be made as of January 1, 2006, is:

A)         Buildings

Building maintenance expense

360,000

 

360,000

B)          Buildings

360,000

 

Retained earnings

 

360,000

C)          Buildings

360,000

 

Accumulated depreciation

 

20,800

Cumulative effect change in accounting

 

339,200

D)         Buildings

360,000

 

Accumulated depreciation

 

20,800

Retained earnings

 

339,200

 

 

 

  1. Asset C3PO has a depreciable base of $16.5 million and a service life of ten years. What would the accumulated depreciation be at the end of year five under the sum-of-the-years' digits method?
    1. $4.5 million.
    2. $8.25 million.
    3. $12 million.
    4. None of the above is correct.

 

                         

 

  1. Granite Enterprises acquired a patent from Southern Research Corporation on 1/1/05 for $4 million. The patent will have a useful life of 10 years, even though its legal life is 20 years. Rocky Corporation has made a commitment to purchase the patented product from Granite for

$200,000 at the end of 5 years. Compute Granite's patent amortization for 2005, assuming the straight-line method is used.

A) $380,000

B)   $400,000

C)   $760,000

D) $800,000

 

                         

 

 

  1. Jennings Advertising Inc. reported the following on its December 31, 2005, balance sheet: Equipment….. $500,000

Accumulated depreciation—equipment….$135,000

 

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

    1. 2.7 years
    2. 3 years
    3. 7 years
    4. 7.3 years

 

                         

 

  1. Gulf Consulting Co. reported the following on its December 31, 2005, balance sheet: Equipment (at cost)….. $700,000

 

In a footnote, Gulf indicates that it uses straight-line depreciation over 5 years and estimates salvage value as 10% of cost. Gulf's equipment averages 3.5 years at December 31, 2005. What is the book value of Gulf's equipment at December 31, 2005?

A) $490,000

B)   $441,000

C)   $259,000

D) $210,000

 

                         

 

 

  1. Fellingham Corporation purchased equipment on January 1, 2004, for $200,000. The company estimated the equipment would have a useful life of 10 years with $20,000 salvage value. Fellingham uses straight-line depreciation. Early in 2006, Fellingham reassessed the equipment's condition and determined that its total useful life would be only six years and that it would have no salvage value. How much would Fellingham report as depreciation expense on this equipment for 2006?

A) $24,000

B)   $27,333

C)   $36,000

D) $41,000

 

 

 

 

 

Problems

 

Use the following to answer questions 100-:

 

On January 1, 2006, Hobart Mfg. Co. purchased a drill press at a cost of $36,000. The drill press is expected to last 10 years and have a residual value of $6,000. During its ten-year life, the equipment is expected to produce 500,000 units of product. In 2006 and 2007, 25,000 and 84,000 units, respectively, were produced.

 

  1. Required:

Compute depreciation expense for 2006 and 2007 and the book value of the drill press at December 31, 2006 and 2007, assuming the straight-line method is used.

 

 

 

 

 

 

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