ACC 308 3-3 Quiz Chapter 11

1)

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

Cost, residual value, and physical life.

Cost, replacement value, and service life.

Fair value, residual value, and economic life.

Cost, residual value, and service life.

2)

The depreciable base for an asset is:

Its service life.

The excess of its cost over residual value.

The difference between its replacement value and cost.

The amount allowable under MACRS

3)

Depreciation, depletion, and amortization:

All refer to the process of allocating the cost of long-term assets used in the business over future periods.

All generally use the same methods of cost allocation.

Are all handled the same in arriving at taxable income.

All of the above are correct.

4)

Cutter Enterprises purchased equipment for $72,000 on January 1, 2013. The equipment is expected to have a five-year life and a residual value of $6,000.

Using the straight-line method, depreciation for 2013 would be:

$13,200.

$14,400.

$72,000.

None of the above is correct.

($72,000 - 6,000) ÷ 5 = $13,200

5)

The legal life of a patent is:

40 years.

20 years.

Life of the inventor plus 50 years.

Indefinite.

6)

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

A retrospective change back to the date of acquisition as though the current estimated life and residual value had been used all along.

A prospective change from the current year through the remainder of its useful life, using the new estimates.

A cumulative adjustment to income in the current year for the difference in depreciation under the new versus old estimates.

None of the above is correct.

7)

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

Relevant and objectively determined.

Material and market driven.

Unplanned and sudden.

Significant.

8)

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

Fair value.

Present value of expected cash flows.

Undiscounted expected cash flows.

Accumulated depreciation.

9)

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

Carrying value.

Undiscounted future cash flows.

Fair value.

Future revenues.

10)

Which of the following types of subsequent expenditures normally is capitalized?

Additions.

Improvements.

Rearrangements.

All of the above are normally capitalized.

11)

On April 29, 2013, Quality Appliances purchased equipment for $303,000. The estimated service life of the equipment is six years and the estimated residual value is $33,000. Quality's fiscal year ends on December 31.

 

Required:

Calculate depreciation for 2013 and 2014 using each of the three methods listed. Quality calculates partial year depreciation based on the number of months the asset is in service. (Do not round intermediate calculations.)

 

12)

Belltone Company made the following expenditures related to its 10-year-old manufacturing facility:

  

1. The heating system was replaced at a cost of $235,000. The cost of the old system was not known. The company accounts for improvements as reductions of accumulated depreciation.

2. A new wing was added at a cost of $840,000. The new wing substantially increases the productive capacity of the plant.

3. Annual building maintenance was performed at a cost of $21,500.

4. All of the machinery on the assembly line in the plant was rearranged at a cost of $54,000. The rearrangement clearly increases the productive capacity of the plant.

 

Required:

Prepare journal entries to record each of the above expenditures. (If no entry is required for a particular event, select "No journal entry required" in the first account field.)

 

 

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