Exam
Name___________________________________
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
Provide an appropriate response.
1)
Explain why a business asset may be depreciated using two or more different methods.
1)
2)
Explain how to determine the depreciation fraction in any year of an asset’s life when using
the sum–of–the–years’–digits method of depreciation.
2)
3)
Explain how the annual depreciation amount is found using the units–of–production
method.
3)
4)
Explain in your own words why the accumulated depreciation plus the book value equals
the total cost in each year of an asset’s life.
4)
5)
Compare the three depreciation methods: straight–line, double–declining–balance, and
sum–of–the–years’–digits.
5)
6)
Explain in your own words why the book values of an asset may never be less than the
salvage value.
6)
7)
Describe in your own words the conditions under which the units–of–production method
of depreciation is most applicable.
7)
8)
Describe three features that are unique to the Modified ACRS method of depreciation.
8)
1
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Solve the problem. Round to the nearest dollar.
9)
Central Street bought a rolling machine that cost $76,000. The expected life is 700,000 hours of
production with a salvage value of $7600. Find the book value at the end of the third year. Use the
units–of–production method of depreciation given the following production schedule.
Year 1 175,000 hours
Year 2 171,000 hours
Year 3 164,000 hours
9)
A)
$17,400
B)
$51,000
C)
$20,629
D)
$25,000
Use the sum–of–the–years’–digits method of depreciation. Round to the nearest dollar.
10)
Find the depreciation in the third year for a power generator which costs $17,000, has a life of 12
years, and an estimated scrap value of $1700.
10)
A)
$1962
B)
$654
C)
$653
D)
$2179
Find the annual straight–line rate of depreciation for the estimated life.
11)
50 years
11)
A)
1.0%
B)
50%
C)
0.2%
D)
2.0%
Solve the problem.
12)
A printing press cost $11,000 and has an estimated life of 9 years and a scrap value of $550. Find the
total depreciation at the end of 7 years using the straight–line method. Round to nearest dollar.
12)
A)
$2872
B)
$8128
C)
$9839
D)
$2444
2
Use the MACRS depreciation rates table to solve the problem. Round to the nearest dollar.
MACRS Depreciation Rates
Applicable Percent for the Class of Property
Recovery
Year 3–Year 5–Year 7–Year 10–Year 20–Year 27.5–Year
1
2
3
4
5
6
7
8
9
10
11
33.33
44.45
14.81
7.41
20.00
32.00
19.20
11.52
11.52
5.76
14.29
24.49
17.49
12.49
8.93
8.92
8.93
4.46
10.00
18.00
14.40
11.52
9.22
7.37
6.55
6.55
6.56
6.55
3.28
3.750
7.219
6.677
6.177
5.713
5.285
4.888
4.522
4.462
4.461
4.462
3.485
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.637
3.636
13)
Midtown Florists purchased a delivery van (3–year property) for $15,500. Find the book value at
the end of two years.
13)
A)
$7440
B)
$12,056
C)
$10,334
D)
$3444
Find the book value using the MACRS method of depreciation and the MACRS depreciation rates table. Round to the
nearest dollar.
MACRS Depreciation Rates
Applicable Percent for the Class of Property
Recovery
Year 3–Year 5–Year 7–Year 10–Year 20–Year 27.5–Year
1
2
3
4
5
6
7
8
9
10
11
33.33
44.45
14.81
7.41
20.00
32.00
19.20
11.52
11.52
5.76
14.29
24.49
17.49
12.49
8.93
8.92
8.93
4.46
10.00
18.00
14.40
11.52
9.22
7.37
6.55
6.55
6.56
6.55
3.28
3.750
7.219
6.677
6.177
5.713
5.285
4.888
4.522
4.462
4.461
4.462
3.485
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.637
3.636
14)
Cost: $114,500
Recovery Period: 27.5–year
After: Third Year
14)
A)
$94,295
B)
$103,050
C)
$102,183
D)
$98,020
Find the first year’s depreciation, using the double–declining–balance method. Round to the nearest dollar.
15)
Cost: $32,000
Est. life: 30 years
Est. scrap: $5000
15)
A)
$1067
B)
$1800
C)
$900
D)
$2133
Find the annual amount of depreciation using the straight–line method. Round to the nearest dollar.
16)
Cost: $40,000
Estimated life: 35 years
Estimated scrap value: None
16)
A)
$14,000
B)
$4000
C)
$1143
D)
$500
4
17)
Cost: $360
Estimated life: 3 years
Estimated scrap value: $72
17)
A)
$24
B)
$96
C)
$72
D)
$120
Find the book value using the MACRS method of depreciation and the MACRS depreciation rates table. Round to the
nearest dollar.
MACRS Depreciation Rates
Applicable Percent for the Class of Property
Recovery
Year 3–Year 5–Year 7–Year 10–Year 20–Year 27.5–Year
1
2
3
4
5
6
7
8
9
10
11
33.33
44.45
14.81
7.41
20.00
32.00
19.20
11.52
11.52
5.76
14.29
24.49
17.49
12.49
8.93
8.92
8.93
4.46
10.00
18.00
14.40
11.52
9.22
7.37
6.55
6.55
6.56
6.55
3.28
3.750
7.219
6.677
6.177
5.713
5.285
4.888
4.522
4.462
4.461
4.462
3.485
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.637
3.636
18)
Cost: $9680
Recovery Period: 5–year
After: First Year
18)
A)
$6454
B)
$5377
C)
$8297
D)
$7744
Find the annual amount of depreciation using the units–of–production method. Round to the nearest dollar.
19)
Depreciation per unit: $0.02
Units of production: 291,000
19)
A)
$145,500
B)
$1,455,000
C)
$5820
D)
$582
5
Find the book value after the given number of years, using the straight–line method. Round your answer to the nearest
dollar.
20)
Find the book value at the end of 2 years.
Cost: $84,100
Estimated life: 30 years
Estimated scrap value: $6728
20)
A)
$5158
B)
$81,521
C)
$78,942
D)
$78,493
Find the depreciation per unit. Round to the nearest cent.
21)
Cost: $673,000
Salvage: $67,300
Est. Life: 17,000 hours
21)
A)
$35.63
B)
$356.30
C)
$395.90
D)
$39.59
Use the sum–of–the–years’–digits method of depreciation. Round to the nearest dollar.
22)
Scot Cleaners bought a new trouser press for $7500 and estimates its life at 4 years at which time
the salvage value is expected to be $750. Find the amount of depreciation each year.
22)
A)
$1688, $1688, $1688, $1688
B)
$3750, $1875, $938, $188
C)
$2700, $2025, $1350, $675
D)
$3000, $2250, $1500, $750
Find the sum–of–the–years’–digits depreciation fraction for the first year.
23)
20 years
23)
A)
40
210
B)
1
210
C)
20
210
D)
20
40
6
Find the book value using the MACRS method of depreciation and the MACRS depreciation rates table. Round to the
nearest dollar.
MACRS Depreciation Rates
Applicable Percent for the Class of Property
Recovery
Year 3–Year 5–Year 7–Year 10–Year 20–Year 27.5–Year
1
2
3
4
5
6
7
8
9
10
11
33.33
44.45
14.81
7.41
20.00
32.00
19.20
11.52
11.52
5.76
14.29
24.49
17.49
12.49
8.93
8.92
8.93
4.46
10.00
18.00
14.40
11.52
9.22
7.37
6.55
6.55
6.56
6.55
3.28
3.750
7.219
6.677
6.177
5.713
5.285
4.888
4.522
4.462
4.461
4.462
3.485
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.637
3.636
24)
Cost: $33,900
Recovery Period: 5–year
After: First Year
24)
A)
$29,056
B)
$22,601
C)
$23,052
D)
$27,120
Find the annual amount of depreciation using the straight–line method. Round to the nearest dollar.
25)
Cost: $4400
Estimated life: 8 years
Estimated scrap value: $900
25)
A)
$900
B)
$550
C)
$113
D)
$438
7
Find the book value after the given number of years, using the straight–line method. Round your answer to the nearest
dollar.
26)
Find the book value at the end of the first year.
Cost: $4500
Estimated life: 5 years
Estimated scrap value: $700
26)
A)
$760
B)
$3740
C)
$3600
D)
$2980
Use the MACRS depreciation rates table to find the recovery percent (rate), given the recovery year and recovery period.
MACRS Depreciation Rates
Applicable Percent for the Class of Property
Recovery
Year 3–Year 5–Year 7–Year 10–Year 20–Year 27.5–Year
1
2
3
4
5
6
7
8
9
10
11
33.33
44.45
14.81
7.41
20.00
32.00
19.20
11.52
11.52
5.76
14.29
24.49
17.49
12.49
8.93
8.92
8.93
4.46
10.00
18.00
14.40
11.52
9.22
7.37
6.55
6.55
6.56
6.55
3.28
3.750
7.219
6.677
6.177
5.713
5.285
4.888
4.522
4.462
4.461
4.462
3.485
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.637
3.636
27)
Recovery year: 4
Recovery period: 5–year
27)
A)
12.49%
B)
11.52%
C)
7.41%
D)
8.93%
Find the first year’s depreciation using the MACRS method of depreciation and the MACRS depreciation rates table.
Round to the nearest dollar.
MACRS Depreciation Rates
Applicable Percent for the Class of Property
Recovery
Year 3–Year 5–Year 7–Year 10–Year 20–Year 27.5–Year
1
2
3
4
5
6
7
8
9
10
11
33.33
44.45
14.81
7.41
20.00
32.00
19.20
11.52
11.52
5.76
14.29
24.49
17.49
12.49
8.93
8.92
8.93
4.46
10.00
18.00
14.40
11.52
9.22
7.37
6.55
6.55
6.56
6.55
3.28
3.750
7.219
6.677
6.177
5.713
5.285
4.888
4.522
4.462
4.461
4.462
3.485
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.637
3.636
28)
Cost: $9720
Period: 5–year
28)
A)
$1944
B)
$3240
C)
$1389
D)
$4321
Solve the problem.
29)
Tech Support Associates purchased a new computer network server and replaced all its terminals
for $28,900. Its estimated life is 3 years, at which time it will have a scrap value of $2800. Use the
straight–line method of depreciation to find the annual amount of depreciation. Find the book
value at the end of 2 years.
29)
A)
$9633, $9634
B)
$8700, $11,500
C)
$8700, $17,400
D)
$9633, $19,266
9
Find the book value using the MACRS method of depreciation and the MACRS depreciation rates table. Round to the
nearest dollar.
MACRS Depreciation Rates
Applicable Percent for the Class of Property
Recovery
Year 3–Year 5–Year 7–Year 10–Year 20–Year 27.5–Year
1
2
3
4
5
6
7
8
9
10
11
33.33
44.45
14.81
7.41
20.00
32.00
19.20
11.52
11.52
5.76
14.29
24.49
17.49
12.49
8.93
8.92
8.93
4.46
10.00
18.00
14.40
11.52
9.22
7.37
6.55
6.55
6.56
6.55
3.28
3.750
7.219
6.677
6.177
5.713
5.285
4.888
4.522
4.462
4.461
4.462
3.485
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.637
3.636
30)
Cost: $436,000
Recovery Period: 7–year
After: Fourth year
30)
A)
$54,456
B)
$200,909
C)
$136,206
D)
$125,568
Find the first year’s depreciation using the MACRS method of depreciation and the MACRS depreciation rates table.
Round to the nearest dollar.
MACRS Depreciation Rates
Applicable Percent for the Class of Property
Recovery
Year 3–Year 5–Year 7–Year 10–Year 20–Year 27.5–Year
1
2
3
4
5
6
7
8
9
10
11
33.33
44.45
14.81
7.41
20.00
32.00
19.20
11.52
11.52
5.76
14.29
24.49
17.49
12.49
8.93
8.92
8.93
4.46
10.00
18.00
14.40
11.52
9.22
7.37
6.55
6.55
6.56
6.55
3.28
3.750
7.219
6.677
6.177
5.713
5.285
4.888
4.522
4.462
4.461
4.462
3.485
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.637
3.636
31)
Cost: $8640
Period: 3–year
31)
A)
$1659
B)
$2880
C)
$1280
D)
$1728
11
Use the MACRS depreciation rates table to solve the problem. Round to the nearest dollar.
MACRS Depreciation Rates
Applicable Percent for the Class of Property
Recovery
Year 3–Year 5–Year 7–Year 10–Year 20–Year 27.5–Year
1
2
3
4
5
6
7
8
9
10
11
33.33
44.45
14.81
7.41
20.00
32.00
19.20
11.52
11.52
5.76
14.29
24.49
17.49
12.49
8.93
8.92
8.93
4.46
10.00
18.00
14.40
11.52
9.22
7.37
6.55
6.55
6.56
6.55
3.28
3.750
7.219
6.677
6.177
5.713
5.285
4.888
4.522
4.462
4.461
4.462
3.485
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.637
3.636
32)
Angelica Healthcare purchased new lab equipment (7–year property) for $138,000. Find the
accumulated depreciation at the end of 5 years.
32)
A)
$130,051
B)
$119,522
C)
$114,154
D)
$107,212
Solve the problem. Round to the nearest dollar.
33)
SLM Instruments bought a metal punch machine at a cost of $8900. The expected life is 7000 hours
of production with a salvage value of $890. Find the book value at the end of the third year. Use the
units–of–production method of depreciation given the following production schedule.
Year 1 1770 hours
Year 2 1210 hours
Year 3 1590 hours
33)
A)
$3690
B)
$5210
C)
$3090
D)
$2800
Use the sum–of–the–years’–digits method of depreciation. Round to the nearest dollar.
34)
Find the book value at the end of the second year for an air filtration system which cost $5900, has a
life of 5 years, and an estimated scrap value of $590.
34)
A)
$2360
B)
$3776
C)
$2714
D)
$3186
12
Find the first year‘s depreciation using the sum–of–the–years’–digits method of depreciation. Round to the nearest dollar.
35)
Cost: $80,000
Estimated life: 5 years
Estimated scrap value: $5000
Depreciation (year 1): $
35)
A)
$55,000
B)
$15,000
C)
$25,000
D)
$21,667
Find the book value using the MACRS method of depreciation and the MACRS depreciation rates table. Round to the
nearest dollar.
MACRS Depreciation Rates
Applicable Percent for the Class of Property
Recovery
Year 3–Year 5–Year 7–Year 10–Year 20–Year 27.5–Year
1
2
3
4
5
6
7
8
9
10
11
33.33
44.45
14.81
7.41
20.00
32.00
19.20
11.52
11.52
5.76
14.29
24.49
17.49
12.49
8.93
8.92
8.93
4.46
10.00
18.00
14.40
11.52
9.22
7.37
6.55
6.55
6.56
6.55
3.28
3.750
7.219
6.677
6.177
5.713
5.285
4.888
4.522
4.462
4.461
4.462
3.485
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.637
3.636
36)
Cost: $235,000
Recovery Period: 10–year
After: First Year
36)
A)
$177,449
B)
$201,419
C)
$192,700
D)
$211,500
37)
Cost: $496,000
Recovery Period: 5–year
After: Third year
37)
A)
$95,232
B)
$400,768
C)
$142,848
D)
$279,099
Use the double–declining–balance method of depreciation. Round to the nearest dollar.
38)
New Town Deli buys refrigerated counters for $25,000 and estimates the life at 5 years with a scrap
value of $2500. What is the amount of depreciation for the third year?
38)
A)
$2500
B)
$3600
C)
$4500
D)
$3240
Find the book value using the MACRS method of depreciation and the MACRS depreciation rates table. Round to the
nearest dollar.
MACRS Depreciation Rates
Applicable Percent for the Class of Property
Recovery
Year 3–Year 5–Year 7–Year 10–Year 20–Year 27.5–Year
1
2
3
4
5
6
7
8
9
10
11
33.33
44.45
14.81
7.41
20.00
32.00
19.20
11.52
11.52
5.76
14.29
24.49
17.49
12.49
8.93
8.92
8.93
4.46
10.00
18.00
14.40
11.52
9.22
7.37
6.55
6.55
6.56
6.55
3.28
3.750
7.219
6.677
6.177
5.713
5.285
4.888
4.522
4.462
4.461
4.462
3.485
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.637
3.636
39)
Cost: $447,500
Recovery Period: 7–year
After: First Year
39)
A)
$402,750
B)
$337,907
C)
$358,000
D)
$383,552
Use the MACRS depreciation rates table to solve the problem. Round to the nearest dollar.
MACRS Depreciation Rates
Applicable Percent for the Class of Property
Recovery
Year 3–Year 5–Year 7–Year 10–Year 20–Year 27.5–Year
1
2
3
4
5
6
7
8
9
10
11
33.33
44.45
14.81
7.41
20.00
32.00
19.20
11.52
11.52
5.76
14.29
24.49
17.49
12.49
8.93
8.92
8.93
4.46
10.00
18.00
14.40
11.52
9.22
7.37
6.55
6.55
6.56
6.55
3.28
3.750
7.219
6.677
6.177
5.713
5.285
4.888
4.522
4.462
4.461
4.462
3.485
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.637
3.636
40)
Marcus McGuire purchased a rental duplex (27.5–year property) for $101,000. Find its book value
at the end of 5 years.
40)
A)
$79,118
B)
$82,791
C)
$86,463
D)
$71,169
Find the book value to the nearest dollar.
41)
Cost $7650, life 5 years, scrap value $612 at the end of 1 year, sum–of–the–years’–digits method
41)
A)
$6120
B)
$6242
C)
$5304
D)
$4590
Solve the problem.
42)
A drill press cost $7100 and has an estimated life of 9 years and a scrap value of $355. Find the book
value at the end of 6 years using the straight–line method. Round to nearest dollar.
42)
A)
$4497
B)
$6351
C)
$2367
D)
$2603
15
Find the depreciation per unit. Round to the nearest cent.
43)
Cost: $30,000
Salvage: $3000
Est. Life: 310,000 miles
43)
A)
$0.90
B)
$1.00
C)
$0.09
D)
$0.10
Find the annual amount of depreciation using the units–of–production method. Round to the nearest dollar.
44)
Depreciation per unit: $0.44
Units of production: 85,000
44)
A)
$3740
B)
$1932
C)
$19,318
D)
$37,400
Find the first year’s depreciation using the MACRS method of depreciation and the MACRS depreciation rates table.
Round to the nearest dollar.
MACRS Depreciation Rates
Applicable Percent for the Class of Property
Recovery
Year 3–Year 5–Year 7–Year 10–Year 20–Year 27.5–Year
1
2
3
4
5
6
7
8
9
10
11
33.33
44.45
14.81
7.41
20.00
32.00
19.20
11.52
11.52
5.76
14.29
24.49
17.49
12.49
8.93
8.92
8.93
4.46
10.00
18.00
14.40
11.52
9.22
7.37
6.55
6.55
6.56
6.55
3.28
3.750
7.219
6.677
6.177
5.713
5.285
4.888
4.522
4.462
4.461
4.462
3.485
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.636
3.637
3.636
45)
Cost: $88,800
Period: 20–year
45)
A)
$6410
B)
$1614
C)
$8880
D)
$3330