Depreciation

Lamar Printing Company determines that a printing press used in its operations has suffered a permanent impairment in value because of technological changes. An entry to record the impairment should

include a credit to the equipment accumulated depreciation account

Bonita Corporation's plant was destroyed by a tornado. The plant had a cost of $600,000 and accumulated depreciation of $174,000 at the time of the loss. The plant will not be rebuilt. They received $542,000 from their insurance company. What amount of the gain or loss will be recorded?

$116,000 gain on disposal of asset 542,000 - (600,000 - 174,000) 542,000 - 426,000 = 116,000

Concord Corporation purchased a depreciable asset for $586,000 on January 1, 2023. The estimated salvage value is $55,000, and the estimated useful life is 9 years. The straight-line method is used for depreciation. In 2026, Concord changed its estimates to a total useful life of 5 years with a salvage value of $88,000. What is 2026 depreciation expense

$160,500 dep. = (cost - salvage) / useful life = (586,000 - 55,000) / 9 = 59,000 59,000 x 3 years = 177,000 bv of asset = cost - accumulated deprecation = 586,000 - 177,000 = 409,000 new salvage = 88,000 new est. useful life = 5 years remaining life of asset = 5 - 3 = 2 = (409,000 - 88,000) / 2 = 160,500

Cullumber Company purchased a depreciable asset for $174,200. The estimated salvage value is $13,500, and the estimated useful life is 10 years. The straight-line method will be used for depreciation. What is the asset's depreciation base?

$160,700 cost of asset - salvage value 174,200 - 13,500 = 160,700

Blossom Corporation purchased a truck at the beginning of 2025 for $109,300. The truck is estimated to have a salvage value of $4,100 and a useful life of 125,000 miles. It was driven 23,000 miles in 2025 and 31,000 miles in 2026. Depreciation expense for 2025 is

$19,366 depreciation rate = (cost - salvage) / total estimated useful life = (109,300 - 4,100) / 125,000 = 0.8416 23,000 x 0.842 = 19,366

Blossom Co., which uses straight-line depreciation and amortization, incurred research and development costs in 2026 as follows: Materials used in research and development costs: 1,000,000 Equipment acquired that will have alternative future uses research and development projects (no salvage): 3,500,000 Depreciation for 2026 on the above equipment: 583,333 Personnel costs of persons involved in research and development projects: 800,000 Consulting fees paid to outsiders for research and development projects: 350,000 Indirect costs reasonably allocable to research and development projects: 275,000 total: $6,508,333 The amount of research and development costs charged to expense in Blossom's 2026 income statement should be...

$3,008,333 1,000,000 + 583,333 + 800,000 + 350,000 + 275,000 = 3,008,333 (everything but "equipment acquired that will have alternative futures uses research and development projects")

Marigold Corporation, which has a calendar year accounting period, purchased a new machine for $82,800 on April 1, 2021. At that time, Marigold expected to use the machine for nine years and then sell it for $8,280. The machine was sold for $45,000 on Sept. 30, 2026. Assuming straight-line depreciation, no depreciation in the year of acquisition, and a full year of deprecation in the year of retirement, the gain to be recognized at the time of sale would be

$3,600 (82,800 - 8,280) / 9 = 8,280 5 1/2 years 8,280 x 5 = 41,400 ~ book value 45,000 - 41,400 = 3,600 gain

On January 1, 2022, Concord Company purchased equipment for $309,750. The equipment is estimated to have a salvage value of $27,000 and is being depreciated over five years using the sum-of-the-years'-digits method. What is depreciation expense on the equipment for the year ended December 31, 2025?

$37,700 sum of years digit: (cost - salvage) x (remaining life / sum of years) 1 + 2 + 3 + 4 + 5 = 15 (309,750 - 27,000) x (2/15) = 37,700

On January 1, 2025, the Accumulated Depreciation - Machinery account of a particular company showed a balance of $1,480,000. At the end of 2025, after the adjusting entries were posted, it showed a balance of $1,600,000. In 2025, one of the machines which cost $510,000 was sold for $241,000 cash. This resulted in a loss of $15,300. Assuming that no other assets were disposed of during the year, how much was depreciation expense for 2025?

$373,700 510,000 - (241,000 + 15,300) = 253,700 1,600,000 + 253,700 - 1,480,000 = 373,700

Orton Corporation, which has a calendar year accounting period, purchased a new machine for $80,000 on April 1, 2021. At that time, Orton expected to use the machine for nine years and then sell it for $8,000. The machine was sold for $44,000 on Sept. 30, 2026. Assuming straight-line depreciation, no depreciation in the year of acquisition, and a full year of depreciation in the year of retirement, the gain to be recognized at the time of sale would be

$80,000 - [($80,000 - $8,000) ÷ 9 × 5] = $40,000 (BV); $44,000 - $40,000 = $4,000 (gain)

Marsh Corporation purchased a machine on July 1, 2023 for $1,500,000. The machinewas estimated to have a useful life of 10 years with an estimated salvage value of $84,000. In 2026, it became apparent that the machine would become obsolete after December 31, 2030 and thus have no scrap value. Accumulated depreciation on this machine at December 31, 2025 was $354,000. What amount should be charged to depreciation expense for 2026?

($1,500,000 - $354,000) ÷ 5 = $229,200

Grover Corporation purchased a truck at the beginning of 2025 for $109,200. The truck is estimated to have a salvage value of $4,200 and a useful life of 120,000 miles. It was driven 21,000 miles in 2025 and 29,000 miles in 2026. Depreciation expense for 2026 is

($109,200 - $4,200) ÷ 120,000 = $0.875 per mile; $0.875 × 29,000 = $25,375

On January 1, 2019, Forrest Company purchased equipment for $390,000. The equipment is estimated to have a salvage value of $12,000 and is being depreciated over eight years under the sum-of-the-years'-digits method. What should be the charge for depreciation of this equipment for the year ended December 31, 2026?

($390,000 - $12,000) × 1/36 = $10,500

If Crane, Inc. uses the composite method and its composite rate is 7.5% per year, what journal entry should the company record when plant assets that originally cost $134,000 and have been used for 10 years are sold for $38,000?

(dr.) Cash 38,000 (dr.) Accumulated Depreciation - Plant Assets 96,000 (cr.) Plant Assets 134,000

Bonita Industries traded in a manual pressing machine for an automated pressing machine and gave $44000 cash. The old machine cost $473000 and had a net book value of $338000. The old machine had a fair value of $290000. Which of the following is the correct journal entry to record the exchange assuming commercial substance?

(dr.) Equipment 334,000 (dr.) Loss on Disposal 48,000 (dr.) Accumulated Depreciation 135,000 (cr.) Equipment 473,000 (cr.) Cash 44,000

Cullumber, Inc. purchased equipment in 2024 for $882,000. Two years later it became apparent to Cullumber that this equipment had suffered an impairment of value. In early 2026, the book value of the asset is $581,000 and it is estimated that the fair value is now only $356,000. The entry to record the loss on impairment is

(dr.) Loss on impairment 225,000 (cr.) Accumulated depreciation- equipment 225,000

what is depreciation expense formula?

(historical cost - salvage cost) / useful life x consumption

A schedule of machinery owned by Sheridan Co. is presented below: Total Cost: Machine X: $581,000 Total Cost: Machine Y: $817,000 Total Cost: Machine Z: $283,000 Estimated Salvage Value: Machine X: $42,000 Estimated Salvage Value: Machine Y: $78,000 Estimated Salvage Value: Machine Z: $58,000 Estimated Life in Years: Machine X: 14 Estimated Life in Years: Machine Y: 10 Estimated Life in Years: Machine Z: 6 Sheridan computes depreciation by the composite method. The composite rate of depreciation (in percent) for these assets is...

8.92 depreciation rate = (cost - salvage) / total est. useful life machine X: = (581,000 - 42,000) / 14 = 38,500 machine Y: = (817,000 - 78,000) / 10 = 73,900 machine Z: (283,000 - 58,000) / 6 = 37, 500 38,500 + 73,900 + 37,500 = 149,900 581,000 + 817,000 + 283,000 = 1,681,000 149,900 / 1,681,000 = 0.0892 ~ 8.92%

A schedule of machinery owned by Bonita Co. is presented below: Total Cost: Machine X: $610,000 Total Cost: Machine Y: $750,000 Total Cost: Machine Z: $380,000 Estimated Salvage Value: Machine X: $50,000 Estimated Salvage Value: Machine Y: $38,000 Estimated Salvage Value: Machine Z: $104,000 Estimated Life in Years: Machine X: 14 Estimated Life in Years: Machine Y: 10 Estimated Life in Years: Machine Z: 6 Bonita computes depreciation by the composite method. The composite life (in years) for these assets is:

9.8 composite life (in years) = total depreciable costs / total depreciation expense total depreciable costs: Machine X: 610,000 - 50,000 = 560,000 Machine Y: 750,000 - 38,000 = 712,000 Machine Z: 380,000 - 104,000 = 276,000 total = 1,548,000 total depreciation expense: Machine X: 560,000 / 14 = 40,000 Machine Y: 712,000 / 10 = 71,200 Machine Z: 276,000 / 6 = 46,000 total = 157,200 1,548,000 / 157,200 = 9.8

Recording the adjusting entry for depreciation has the same effect as recording the adjusting entry for...

a prepaid expense

Watts Corporation made a very large arithmetical error in the preparation of its year-end financial statements by improper placement of a decimal point in the calculation of depreciation. The error caused the net income to be reported at almost double the proper amount. Correction of the error when discovered in the next year should be treated as

a prior period adjustment

McDonald Company acquired machinery on January 1, 2020 which it depreciated under the straight line method with an estimated line of fifteen years and no salvage value. On January 1, 2025, McDonald estimated that the remaining life of this machinery was six years with no salvage value. How should this change be accounted for by McDonald?

by setting future annual depreciation equal to one-sixth of the book value on January 1, 2025

Oriole Inc. began operations on October 1, 2025. The company acquired a building on that date for $493000. The useful life of the building is 25 years and the salvage value is $47600. This is Oriole's only building. If the company uses straight-line depreciations, the adjusting journal entry to record depreciation on the building at December 31, 2025 is...

debit Depreciation Expense and credit Accumulated Depreciation - Building, $4454(acquisition - salvage) / years(493,000 - 47,600) / 25= 17,816(493,000 - 17,816 - 47,600) / 96= 4454(96 = 24/25 x 100) (idk why but it works)

On January 1, 2025, Novak Company replaced an engine in one of its delivery trucks. It was a material expenditure which is expected to extend the useful life by 8 years. The cost of the engine was $25,500. The entry to record the purchase would include a...

debit to Accumulated Depreciation of $25,500

The omission of the adjusting entry to record depreciation expense will result in an...

overstatement of assets and an overstatement of stockholders' equity

The book value of a plant asset is

the asset's acquisition cost less the total related depreciation recorded to date

The term "depreciable base," or "depreciation base," as it is used in accounting, refers to

the total amount to be charged (debited) to expense over an asset's useful life