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
