177.
Compare the different depreciation methods (straight-line, units-of-production, and
double-declining-balance) with respect to the amounts of depreciation expense per period
and the total depreciation over the life of the asset.
178.
Explain how to calculate total asset turnover. Describe what it reveals about a company’s
financial condition, whether a higher or lower ratio is desirable, and how it is best applied
for comparative purposes.
179.
How is the cost principle applied to plant asset acquisitions, including lump-sum
purchases?
180.
Explain in detail how to compute each of the following depreciation methods: straight-line,
units-of-production, and double-declining-balance.
181.
Explain the difference between revenue expenditures and capital expenditures and how
they are recorded in the accounting system.
182.
What are the general accounting procedures for recording asset disposals?
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183.
Describe the accounting for natural resources, including their acquisition, cost allocation,
and account titles.
184.
Describe the accounting for intangible assets, including their acquisition, cost allocation,
and accounts involved.
Essay Questions
185.
A company’s property records revealed the following information about its plant assets:
Machine No.
Cost
Salvage Value
Purchase Date
Depreciation Method
1
$42,000
$3,000
10/1
Straight-line
2
86,000
8,600
7/01
Double-declining balance
Calculate the depreciation expense for each machine in Year 1 and Year 2 for the year
ended December 31.
Machine 1:
Year 1 ______________________ Year 2 _______________________
Machine 2:
Year 1 ______________________ Year 2 _______________________
186.
A company’s property records revealed the following information about its plant assets:
Machine No.
Cost
Salvage Value
Purchase Date
Depreciation Method
1
$82,000
$8,000
1/01
Straight-line
2
46,000
3,600
7/01
Double-declining balance
Calculate the depreciation expense for each machine in Year 1 and Year 2 for the year
ended December 31.
Machine 1:
Year 1 ______________________ Year 2 _______________________
Machine 2:
Year 1 ______________________ Year 2 _______________________
187.
A company’s property records revealed the following information about one of its plant
assets:
Cost
Salvage
Value
Purchase
Date
Estimated
Life
Depreciation
Method
$450,000
$30,000
10/01
7 years
Straight-line
Calculate the depreciation expense for the asset in Year 1 and Year 2 for the year ended
December 31.
Year 1 ______________________ Year 2 _______________________
188.
A company’s property records revealed the following information about one of its plant
assets:
Cost
Salvage
Value
Purchase
Date
Estimated
Life
Depreciation
Method
154,000
15,000
01/01
10 years
Double-
declining
balance
Calculate the depreciation expense in Year 1 and Year 2 for the year ended December 31.
Year 1 ______________________ Year 2 _______________________
189.
A company purchased a delivery van on October 1 of the current year at a cost of $40,000.
The van is expected to last six years and has a salvage value of $2,200. The company’s
annual accounting period ends on December 31.
1. What is the depreciation expense for the current year, assuming the straight-line
method is used?
2. What is the book value of the van at the end of the first year?
190.
A building was purchased for $370,000 and depreciated for ten years on a straight-line
basis under the assumption it would have a twenty-year life and a $10,000 salvage value.
At the beginning of the building’s eleventh year it was recognized the building had eight
years of remaining life instead of ten and that at the end of the remaining eight years its
salvage value would be $16,000. What amount of depreciation should be recorded in each
of the building’s remaining eight years?
191.
Greene Company purchased a machine for $75,000 that was expected to last 6 years and
to have a salvage value of $6,000. At the beginning of the machine’s fourth year the
company decided that the estimated useful life should be revised to a total of 10 years
instead of 6 years. Also, the salvage value was re-estimated to be $5,500. Straight-line
depreciation was used throughout the machine’s life. Calculate the depreciation expense
for the fourth year of the machine’s useful life.
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192.
On April 1 of the current year, a company purchased and placed in service a machine with
a cost of $240,000. The company estimated the machine’s useful life to be four years or
60,000 units of output with an estimated salvage value of $60,000. During the current year,
12,000 units were produced.
Prepare the necessary December 31 adjusting journal entry to record depreciation for the
current year assuming the company uses:
a. The straight-line method of depreciation
b. The units-of-production method of depreciation
c. The double-declining balance method of depreciation
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193.
On September 30 of the current year, a company acquired and placed in service a machine
at a cost of $700,000. It has been estimated that the machine has a service life of five
years and a salvage value of $40,000. Using the double-declining-balance method of
depreciation, complete the schedule below showing depreciation amounts for all six years
(round answers to the nearest dollar). The company closes its books on December 31 of
each year.
Depreciation for the Period
End of Period
Year
Beginning
of Period
Book
Value
Depreciation
Rate
Depreciation
Expense
Accumulated
Depreciation
Book
Value
1
2
3
4
5
6
Depreciation for the Period
Depreciation
Depreciation
Accumulated
1
194.
On April 1, Year 1, Astor Corp. purchased and placed a plant asset in service. The
following information is available regarding the plant asset:
Acquisition cost
$130,000
Estimated salvage value
$15,000
Estimated useful life
5 years
Make the necessary adjusting journal entries at December 31, Year 1, and December 31,
Year 2 to record depreciation for each year under the straight-line depreciation method.
195.
On April 1, Year 1, Raines Co. purchased and placed a plant asset in service. The following
information is available regarding the plant asset:
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Acquisition cost
$130,000
Estimated salvage value
$15,000
Estimated useful life
5 years
Make the necessary adjusting journal entries at December 31, Year 1, and December 31,
Year 2 to record depreciation for each year under the double-declining balance
depreciation method:
196.
On January 1, Year 1, Naples purchased a computer system that cost $1,480,000. The
estimated useful life of the computer is 3 years and salvage value is $40,000. Straight-line
depreciation is to be used. On January 1, Year 2, Naples determined that the estimated
useful life of the computer would be 4 years instead of 3 years. The estimated salvage
= $39,000
value will only be $10,000.
Prepare the journal entry to record depreciation expense for Year 1.
Prepare the journal entry to record depreciation expense for Year 2.
197.
The Oberon Company purchased a delivery truck for $95,000 on January 2. The truck was