DEPRECIATION
DEPRECIATION
Theory
4. The major difference between the service life of an asset and its physical
life is that
a. service life refers to the time an asset will be used by a company
and physical life
refers to how long the asset will last.
b. physical life is the life of an asset without consideration of residual value
and service
Life requires the use of residual value.
c. physical life is always longer than service life.
d. service life refers to the length of time an asset is of use to its original
owner, while
physical life refers to how long the asset will be used by all owners.
7. Which of the following is not one of the basic questions that must be
answered before the amount of depreciation charge can be computed?
a. What depreciable base is to be used for the asset?
b. What is the asset's useful life?
c. What method of cost apportionment is best for this asset?
d. What product or service is the asset related to?
7. On April 13, 2014, Neill Co. purchased machinery for $120,000. Residual
value was
estimated to be $5,000. The machinery will be depreciated over ten years
using the
double-declining balance method. If depreciation is computed based on the
nearest
full month, Neill should record depreciation expense for 2015 on this
machinery of
a. $20,800.
b. $20,400.
c. $20,550.
d. $20,933.
8.Matile Co. purchased machinery that was installed and ready for use on
January 3, 2014, at a total cost of $69,000. Residual value was estimated at
$9,000. The machinery will be depreciated over five years using the double-
declining balance method. For the year 2015, Matile should record
depreciation expense on this machinery of
a. $14,400.
b. $16,560.
c. $18,000.
d. $27,600.
9. A plant asset has a cost of $24,000 and a residual value of $6,000. The
asset has a three-year life. If depreciation in the third year amounted to
$3,000, which depreciation method was used?
a. Straight-line
b. Declining balance
c. Sum-of-the-years'-digits
d. Cannot tell from information given
12. On September 19, 2014, McCoy Co. purchased machinery for $190,000.
Residual value was estimated to be $10,000. The machinery will be
depreciated over eight years using the sum-of-the-years-digits method. If
depreciation is computed based on the nearest full month, McCoy should
record depreciation expense for 2015 on this machinery of
a. $40,903.
b. $38,845.
c. $38,750.
d. $35,000.
13.On January 3, 2013, Munoz Co. purchased machinery. The machinery has
an estimated
useful life of eight years and an estimated residual value of $30,000. The
depreciation
applicable to this machinery was $65,000 for 2015, computed by the sum-of-
the-years'-
digits method. The acquisition cost of the machinery was
a. $360,000.
b. $390,000.
c. $420,000.
d. $468,000.