acct chapter 8

Straight line depreciation formula

(cost - salvage value) / useful life

Double declining balance formula

1 / useful life = straight line rate x 2 = DDB x beginning period book value

On June 1, Harding Co. purchased a machine for $14,000 and estimates it will use the machine for five-years with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine's first year (partial) depreciation expense for June 1st through December 31st.

1400

Tops Co. purchases equipment for $12,000 and has been using straight-line depreciation, estimating a 5-year life and $500 salvage value. At the beginning of the third year, Tops decides to use the equipment for a total of 6-years with no salvage value. Compute the revised depreciation for the third year.

1850

On January 3, ATA Company purchases a copy machine for $11,500. The machine is expected to last five years and have a salvage value of $1,500. Compute depreciation expense for the first year, assuming the company uses the straight-line method.

2000

Bina Co. purchased a vehicle on January 1st for $15,000 and estimates it will use the vehicle for eight years with a $3,000 salvage value. Using the double declining-balance depreciation method, compute the vehicle's second year depreciation expense.

2812.5

Bina Co. purchased a machine on January 1st for $15,000 and estimates it will use the machine for three years with a $3,000 salvage value. Bina estimates that they will produce 1,500 units during year one, 1,000 units during year two, and 1,250 units during year three. Using the units-of-production method, compute the machine's second year depreciation expense.

3200

Accumulated depreciation is recorded on which of the following financial statements?

Balance sheet

_________ are expenditures that make a plant asset more efficient or productive, but do not always increase an asset's useful life.

Betterments

Units of production formula

Depreciation per unit = (cost - salvage value / total units of production) Depreciation expense = DPU x units produced in period

Depreciation Expense is reported on which of the following financial statements?

Income statement

On December 31, Briar Co. disposed of a piece of equipment that cost $6,000 with accumulated depreciation of $4,500. The entry to record this disposal would include a debit to which account and for how much?

Loss on Disposal of Equipment for $1,500

_______ repairs are expenditures that keep an asset in good operating condition. They are necessary if an asset is to perform to expectations over its useful life.

Ordinary

________ assets are assets used in a company's operations that have a useful life of more than one accounting period.

Plant, fixed

Niren Co. made modifications to a manufacturing machine that increased its productivity by 40%. Niren would classify this expense as a(n):

betterment

When a company revises an estimate used to record depreciation expense, the company should revise depreciation by using the formula (_______ - revised salvage value)/revised remaining useful life.

book value

Revising estimate formula

book value - revised salvage value / revised remaining useful life

Accumulated depreciation is a ________________ asset account (one that is linked with the plant asset account, but has an opposite normal balance) and is reported on the balance sheet.

contra

The depreciation method that determines the depreciation for the period by multiplying a depreciation rate (often twice the straight-line rate) by the asset's beginning-period book value is known as the __________ method.

declining-balance

_________________ is the process of allocating the cost of a plant asset to expense while it is in use.

depreciation

A company owns an asset that is fully depreciated. The asset is no longer being used in operations and has no market value. The company has decided to ________ the asset by recording an entry to remove it from the balance sheet.

discard

A plant asset is (depreciated/discarded/obsolete) when it is no longer useful to the company, and it has no market value

discarded

Land _________________ are assets that are additions to land and have limited useful lives, such as walkways and fences.

improvements

Forward Co. discarded a machine that cost $5,000 and was fully depreciated. The entry to record this transaction would include a credit to the _________ (Machinery, Loss on Disposal of Machinery, Accumulated Depreciation - Machinery, Depreciation Expense - Machinery) account.

machinery

Which of the following expenses would not be considered an ordinary repair? Replacing small parts Replacing an engine Cleaning Lubricating

replacing an engine

(Revenue/Capital) expenditures are additional costs of plant assets that do not materially increase the asset's life or capabilities.

revenue

Grand Co. owns one copier that was purchased for $10,000 three years ago. The depreciation expense taken on the copier each year has been $2,700; $1,800; and $2,200, based on the number of copies that have been made on the copier. Based on this information, the company uses the ________ depreciation method.

units of production