12) The book value of a plant asset is reported on the balance sheet as the cost of the asset minus
accumulated depreciation.
13) The double-declining-balance method is an accelerated method of depreciation.
14) The use of the Modified Accelerated Cost Recovery System (MACRS) is acceptable for financial
reporting under GAAP.
15) The units-of-production method allocates a varying amount of depreciation each year based on an
asset’s usage.
16) The double-declining-balance method ignores the residual value until the depreciation expense takes
the book value below the residual value.
17) An accelerated depreciation method expenses more of the asset‘s cost at the end of its useful life.
18) For tax purposes, an asset is fully depreciated to a book value of zero.
19) Which of the following depreciation methods allocate a varying amount of depreciation to expense
each year based on an asset’s usage?
A) the straight-line method
B) the annuity method
C) the units-of-production method
D) the double-declining-balance method
20) Which of the following depreciation methods always allocates a higher amount of depreciation in
earlier years than in later years?
A) the units-of-production method
B) the straight-line method
C) the double-declining-balance method
D) the first-in, first-out method
21) On January 1, 2018, Jordan, Inc. acquired a machine for $1,100,000. The estimated useful life of the
asset is five years. Residual value at the end of five years is estimated to be $61,000. Calculate the
depreciation expense per year using the straight-line method.
A) $220,000
B) $207,800
C) $268,800
D) $275,000
22) On January 1, 2018, Sanderson, Inc. acquired a machine for $1,110,000. The estimated useful life of the
asset is five years. Residual value at the end of five years is estimated to be $91,000. What is the book
value of the machine at the end of 2019 if the company uses the straight-line method of depreciation?
A) $666,000
B) $702,400
C) $611,400
D) $665,996
23) On January 1, 2018, Tyson Manufacturing Corporation purchased a machine for $41,100,000. Tyson’s
management expects to use the machine for 32,000 hours over the next six years. The estimated residual
value of the machine at the end of the sixth year is $47,000. The machine was used for 4000 hours in 2018
and 6000 hours in 2019. What is the depreciation expense for 2018 if the corporation uses the units–of–
production method of depreciation? (Round any intermediate calculations to two decimal places, and
your final answer to the nearest dollar.)
A) $5,131,640
B) $13,700,000
C) $7,697,460
D) $5,137,520
24) On January 1, 2018, McHenry Manufacturing Corporation purchased a machine for $40,600,000.
McHenry’s management expects to use the machine for 26,000 hours over the next six years. The
estimated residual value of the machine at the end of the sixth year is $45,000. The machine was used for
3700 hours in 2018 and 5200 hours in 2019. Calculate the book value of the machine at the end of 2019 if
the company uses the units-of-production method of depreciation. (Round any intermediate calculations
to two decimal places, and your final answer to the nearest dollar.)
A) $26,717,691
B) $40,600,000
C) $26,702,294
D) $34,828,703
25) The cost of an asset is $1,070,000, and its residual value is $220,000. Estimated useful life of the asset is
ten years. Calculate depreciation for the first year using the double-declining-balance method of
depreciation. (Do not round any intermediate calculations, and round your final answer to the nearest
dollar.)
A) $170,000
B) $214,000
C) $107,000
D) $85,000
26) The cost of an asset is $1,020,000, and its residual value is $160,000. Estimated useful life of the asset is
five years. Calculate depreciation for the second year using the double-declining-balance method of
depreciation. (Do not round any intermediate calculations, and round your final answer to the nearest
dollar.)
A) $204,000
B) $172,000
C) $344,000
D) $244,800
27) A company purchased a computer on July 1, 2019 for $50,000. The estimated useful life of the
computer was five years, and it has no residual value. Which of the following methods should be used to
best match its expense against the revenue it produces?
A) the units-of-production method
B) the straight-line method
C) the double-declining-balance method
D) the first-in, first-out method
28) Gulfcoast, Inc. purchased a van on January 1, 2019, for $930,000. Estimated life of the van was five
years, and its estimated residual value was $93,000. Gulfcoast uses the straight-line method of
depreciation. Calculate the book value of the van at the end of 2019.
A) $755,625
B) $871,875
C) $837,000
D) $762,600
29) A truck costs $307,000 and is expected to be driven 113,000 miles during its five-year life. Residual
value is expected to be zero. If the truck is driven 31,000 miles during the first year, how much
depreciation should the business record under the units–of-production method? (Round any intermediate
calculations to two decimal places, and your final answer to the nearest dollar.)
A) $96,050
B) $28,107
C) $84,320
D) $56,070
30) Burton, Inc. purchased a van on January 1, 2018, for $800,000. Estimated life of the van was five years,
and its estimated residual value was $90,000. Burton uses the straight-line method of depreciation.
Prepare the journal entry to record the purchase of van for cash. Omit explanation.
31) Hampton, Inc. purchased a van on January 1, 2018, for $800,000. Estimated life of the van was five
years, and its estimated residual value was $90,000. Hampton uses the straight-line method of
depreciation. Prepare the journal entry to record the depreciation expense for 2018 on the van. Omit
explanation.
32) On January 1, 2019, a corporation acquired a truck for $100,000. Residual value was estimated to be
$20,000. The truck can be driven for 50,000 miles over the next three years. Actual usage of the truck was
recorded as 8,640 miles for the first year. Give the journal entry to record depreciation for the first year
calculated as per the units-of-production method. (Do not round your intermediate calculations.)
33) Ten O’Clock, Inc. purchased a van on January 1, 2018, for $800,000. Estimated life of the van was five
years, and its estimated residual value was $90,000. Ten O’Clock uses the straight-line method of
depreciation. Prepare the depreciation schedule.
34) On January 1, 2019, Sapphire Manufacturing Corporation purchased a machine for $40,000,000. The
corporation expects to use the machine for 24,000 hours over the next six years. The estimated residual
value of the machine at the end of the sixth year is $40,000. The schedule of usage of the machine is
below.
Year
Usage
1
4,500
2
6,000
3
5,200
4
4,300
5
2,000
6
2,000
Prepare the depreciation schedule using the units-of-production method of depreciation.
35) The cost of an asset is $10,000,000, and its residual value is $100,000. Estimated useful life of the asset
is four years. Prepare the schedule of depreciation using the double-declining-balance method of
accounting.
36) On January 1, 2018, Forrest Manufacturing Corporation purchased a machine for $40,000,000. The
corporation expects to use the machine for 24,000 hours over the next six years. The estimated residual
value of the machine at the end of the sixth year is $40,000. The corporation used the machine for 3,600
hours in 2018 and 5,000 hours in 2019. What is the depreciation expense for 2018 and 2019 if the
corporation uses the double-declining-balance method of depreciation?