BUS MATH CH 17

The book value in the units-of-production method should never go below the residual value.

True

Trade-in value is the same as the residual value.

True

MACRS does not use residual value; thus, assets are depreciated to zero.

True

Most assets that last longer than one year will be depreciated.

True

Physical deterioration is related to an asset's estimated amount of usefulness.

True

A truck costs $8,000 with a residual value of $1,000. The truck is expected to have a useful life of 70,000 miles. Assuming the truck is driven 15,000 miles the first year, the depreciation expense would be:

$1,500

A new truck costing $50,000 with a residual value of $4,000 has an estimated useful life of five years. Using the declining-balance method at twice the straight-line rate, the depreciation expense in year 2 is:

$12,000

A truck costs $35,000 with a residual value of $2,000. Its service life is five years. Using the declining-balance method at twice the straight-line rate, the book value at the end of year 2 is:

$12,600

What is the depreciation expense for the second year (straight-line method) using the following? Cost of equipment$14,000 Residual value$500 Life 4years

$3,375

Federal Express bought material handling equipment for its hub operations that cost $180,000. Using the MACRS, what is the depreciation expense in year 3 (using a five-year class)?

$34,560

A new piece of equipment costs $18,000 with a residual value of $600 and an estimated useful life of five years. Assuming twice the straight-line rate, the book value at the end of year 2 using the declining-balance method is:

$6,480

Using the straight-line method, what is the depreciation expense for a computer that cost $4,500, has a residual value of $700, and has a life of four years?

$950

For partial-years depreciation, if an asset is purchased on February 8, how many months' depreciation will be taken for the year?

11

Cost minus residual divided by number of years equals depreciation expense taken each year in the straight-line method.

True

Depreciation expense results in an indirect tax savings.

True

Straight-line depreciation does not:

Accelerate depreciation

Book value is:

Cost minus accumulated depreciation

Which method does not deduct residual value in calculating depreciation expense?

Declining-balance method

In a straight-line depreciation schedule, the depreciation expense is the same each year.

True

A depreciation schedule for partial years must cover at least three years.

False

Computers will not depreciate.

False

Depreciation expense is listed on the balance sheet.

False

In the declining-balance method, we can depreciate below the residual value.

False

Land can be depreciated.

False

MACRS is not used for tax purposes.

False

Product obsolescence means the asset has been fully depreciated.

False

Residual value is deducted in calculating depreciation expense in the declining-balance method.

False

Residual value means the actual cash one receives at end of the life of the asset.

False

In the straight-line method, book value never goes below the residual value.

True

Depreciation expense in the declining-balance method is calculated by the depreciation rate:

Times book value at beginning of year