37) On January 1, 2018, Sport Planes 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 book value of the machine at the end of year 2019
if the corporation uses double-declining-balance method of depreciation? (Round your intermediate
calculations.)
38) On January 1, 2018, Dalton 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. Calculate depreciation expense for 2019 if the company uses the
units-of-production method of depreciation.
39) On January 1, 2019, a corporation acquired a truck for $600,000. The residual value was estimated to
be $20,000. The truck can be driven for 50,000 miles over the next three years. The actual usage of the
truck was 8,640 miles for the first year. Calculate the rate of depreciation to be applied and depreciation
for the first year using the units–of-production method. (Do not round your intermediate calculations.)
40) If an asset is disposed of during the year, there is no need to calculate depreciation from the beginning
of the year of disposal to the date of disposal.
41) A business, which has a calendar year accounting period, purchased an asset on March 1, 2018. The
business disposed of the asset on August 31, 2019. For the calendar year 2019, depreciation should be
calculated from January 1 to August 31.
42) On June 30, 2018, Clooney Printers purchased a printer for $59,000. It expects the printer to last for
four years and have a residual value of $6000. Compute the depreciation expense on the printer for the
year ended December 31, 2018, using the straight-line method. (Round any intermediate calculations to
two decimal places, and your final answer to the nearest dollar.)
A) $13,250
B) $6625
C) $14,750
D) $7729
43) Adkins Bakery uses the modified half-month convention to calculate depreciation expense in the year
an asset is purchased or sold. Adkins has a calendar year accounting period and uses the straight-line
method to compute depreciation expense. On March 17, 2018, Adkins acquired equipment at a cost of
$220,000. The equipment has a residual value of $43,000 and an estimated useful life of 4 years. What
amount of depreciation expense will be recorded for the year ending December 31, 2018? (Round any
intermediate calculations to two decimal places, and your final answer to the nearest dollar.)
A) $44,250
B) $36,875
C) $33,188
D) $22,125
44) George, Inc. purchased a van on May 1, 2018, for $800,000. Estimated life of the van was five years,
and its estimated residual value was $80,000. George uses the straight-line method of depreciation.
Prepare the journal entry to record the depreciation expense for 2018 on the van. Omit explanation.
45) If a business changes the estimated useful life, or estimated residual value, of a plant asset,
depreciation expense must be recalculated.
46) When a company makes an accounting change in estimate, Generally Accepted Accounting Principles
require that the company make changes to financial statements of prior years.
47) Which of the following is true when the estimate of an asset’s useful life is changed?
A) The new estimate is ignored until the last year of the asset’s life.
B) The depreciation expense in the prior years are restated.
C) Prior years’ financial statements must be restated.
D) The asset’s remaining depreciable book value will be spread over the asset’s remaining life.
48) Carpenters, Inc., a manufacturing company, acquired equipment on January 1, 2017 for $530,000.
Estimated useful life of the equipment was seven years and the estimated residual value was $14,000. On
January 1, 2020, after using the equipment for three years, the total estimated useful life has been revised
to nine total years. Residual value remains unchanged. The company uses the straight-line method of
depreciation. Calculate depreciation expense for 2020. (Round any intermediate calculations to two
decimal places, and your final answer to the nearest dollar.)
A) $50,476
B) $49,143
C) $58,889
D) $57,333
49) Rotan, Inc. purchased a van on January 1, 2018, for $850,000. Estimated life of the van was five years,
and its estimated residual value was $94,000. Rotan uses the straight-line method of depreciation. At the
beginning of 2020, the corporation revised the total estimated life of the asset from five years to six years.
The estimated residual value remained the same as estimated earlier. Calculate the depreciation expense
for 2020.
A) $151,200
B) $136,900
C) $113,400
D) $75,600
50) Claxton, 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 $98,000. Claxton uses the straight-line method of depreciation.
At the beginning of 2020, the company revised the total estimated life of the asset from five years to four
years. The estimated residual value remained the same as estimated earlier. Calculate the depreciation
expense for 2020.
A) $259,600
B) $210,600
C) $105,300
D) $129,800
51) Companies are required to report plant assets as a single amount, with a note to the financial
statements that provides detailed information.
52) Companies may choose to report plant assets as a single amount, with a note to the financial
statements that provides detailed information, or companies may provide detailed information on the
face of the statement.
53) IFRS permits the presentation of plant assets at their fair market value.
54) U. S. Generally Accepted Accounting Principles permits the presentation of plant assets at their fair
market value.
55) Under U.S. GAAP, plant assets are reported at book value on the balance sheet.
56) Under U.S. GAAP, which of the following is NOT an acceptable way to report plant assets?
A) at fair market value
B) at book value
C) as a single amount, with a note to the financial statements that provides detailed information
D) with detailed information on the face of the balance sheet
57) IFRS permits the presentation of plant assets at their fair market value because ________.
A) U. S. GAAP requires this presentation
B) fair market value may be more relevant
C) fair market value is easier to compute than book value
D) financial statements users are indifferent as to how plant assets are presented
1) Regardless of the type of plant asset disposal, the first step is to bring the depreciation up to date.
2) A fully depreciated plant asset that is still in service is not reported as an asset on the balance sheet.
3) Plant assets remain on the business’s books until they are disposed of.
4) Gain or loss is determined by comparing the cash received and the market value of any other asset
received with the historical cost of the asset disposed of.
5) A fully depreciated plant asset ________.
A) is no longer reported on the balance sheet
B) can be discarded, sold, or exchanged for another plant asset
C) can no longer be used in the business
D) is removed from the accounting records
6) When a plant asset is disposed of, the business must ________.
A) immediately replace it
B) ensure that the plant asset is obsolete or worn out
C) comply with the conservatism principle and record losses but not gains
D) bring the depreciation up to date
7) Discarding plant assets involves disposing of the asset for no cash.
8) If an asset is discarded when it is fully depreciated and has no residual value, the business does not
need to make a journal entry because the book value is zero.
9) A photocopier cost $105,000 when new and has accumulated depreciation of $96,000. If the business
discards this plant asset, the result is ________.
A) a loss of $9000
B) a loss of $96,000
C) a gain of $9000
D) no gain or no loss
10) Brandy Enterprises discarded a computer that was fully depreciated and had no residual value. As a
result of this transaction, Brandy will _________.
A) report a loss equal to the historical cost of the computer.
B) debit the Computer account and credit the Accumulated Depreciation – Computer account.
C) debit the Accumulated Depreciation – Computer account; debit Loss on Disposal of Computer account,
and credit the Computer account.
D) zero out the Computer and Accumulated Depreciation – Computer accounts.
11) Long Island Corp. discards a truck that was originally purchased for $50,000 and had accumulated
depreciation of $30,000. Prepare the journal entry for the disposal. Omit explanation.
12) On June 30, 2019, Coney Island Furniture discarded fully depreciated equipment with a cost $35,000
and no residual value. Prepare the journal entry for the disposal of the equipment. Omit explanation.
13) On June 30, 2018, Staton Island, Inc. discarded equipment costing $40,000. Accumulated Depreciation
as of December 31, 2017, was $25,000. Assume annual depreciation on the equipment is $2,500. Prepare
the journal entries for the 2018 depreciation expense and for the disposal of the equipment. Omit
explanation.