Accounting (Hallie) Chapter Quiz 9
method of figuring depreciation called that provides for the same amount of depreciation for each unit produced or used and is favored by companies that operate big machinery with motors
Units of production method
In the journal entry to record depreciation for store equipment, what account is credited
accumulated depreciation
A capital expenditure results in a debit to a(n)
asset account
included in the cost of constructing a building
insurance costs during construction
What are long-term assets that have no physical existence that are useful in the operations of a business and are not held for sale called
intangible assets
Land acquired so it can be resold in the future is listed on the balance sheet as a(n)
investment
Which of the following is not a fixed asset
supplies
All of the following are needed for the computation of straight-line depreciation except
units produced
A characteristic of a fixed asset is that it is
used in the operation of a business
term that describes the estimated amount of time that the company expects to use a fixed asset before disposing of it
useful life
Which of the following statements is true
Regardless of the depreciation method, the amount of total depreciation expense during the life of the asset will be the same.
expenditures on a fixed asset that only benefit the current period called
Revenue Expenditures
All fixed assets except land depreciate.
True
If a piece of equipment is to be depreciated by the units-of-production method, the equipment cost $55,000 with estimated residual value of $5,000 and estimated life of 100,000 operating hours, what would be the amount of depreciation per operating hour
$.50
If a piece of equipment bought on November 1 20Y1 is to be depreciation by the units-of-production method, the equipment cost $55,000 with estimated residual value of $5,000 and estimated life of 100,000 operating hours, what would be the amount of depreciation for the first year of use if it was operated 2,000 hours
$1,000
If a piece of equipment is to be depreciation by the units-of-production method, the equipment cost $55,000 with estimated residual value of $5,000 and estimated life of 100,000 operating hours, what would be the amount of depreciation for the first year of use if it was operated 20,000 hours
$10,000
Assume that equipment with an estimated life of 4 years and an estimated residual value of $1,000 is acquired at a cost of $21,000. Using the double-declining balance method, what is the amount of depreciation for the first year of use of the equipment
$10,500
Assume that the company bought a piece of equipment on July 1 for $120,000, has an estimated residual value of $10,000, and an estimated useful life of 5 years. What is the amount of depreciation for the first year of use using the straight-line method of computing depreciation
$11,000
A building with an appraisal value of $154,000 is made available at an offer price of $172,000. The purchaser acquires the property for $40,000 in cash, a 90-day note payable for $45,000, and a mortgage amounting to $75,000. The cost of the building to be reported on the balance sheet is
$160,000
What is the amount of depreciation, using the double-declining -balance method for the second year of use for equipment costing $9,000, with an estimated residual value of $600 and an estimated life of 5 years
$2,160
Assume that the company bought a piece of equipment on January 1 for $120,000, has an estimated residual value of $10,000, and an estimated useful life of 5 years. What is the amount of depreciation for the first year of use using the straight-line method of computing depreciation
$22,000
Assume that the company bought a piece of equipment on January 1 for $120,000, has an estimated residual value of $10,000, and an estimated useful life of 5 years. What is the amount of depreciation for the second year of use using the straight-line method of computing depreciation
$22,000
Assume that equipment with an estimated life of 4 years and an estimated residual value of $1,000 is acquired at a cost of $21,000. Using the double-declining balance method, what is the amount of depreciation for the second year of use of the equipment
$5250
Equipment purchased on January 3, 20Y2, for $80,000 was depreciated using the straight-line method based upon a 5-year life and $7,500 residual value. The equipment was sold on December 31, 20Y4, for $30,000. Denote either a gain or loss on the sale of equipment and the amount
$6,500 Loss
A useful life of 10 years is equivalent to what straight-line depreciation rate
.10
Equipment purchased on January 3, 20Y2, for $80,000 was depreciated using the straight-line method based upon a 5-year life and $7,500 residual value. The equipment was sold on December 31, 20Y4, for $40,000. Denote either a gain or loss on the sale of equipment and the amount
3,500 gain
What is the book value of a piece of equipment that cost $50,000 and has accumulated depreciation of $20,000
30,000
account that is the name of the contra asset in which depreciation is recorded as a credit
Accumulated Depreciation
Fixed assets are ordinarily presented on the balance sheet
At cost less accumulated depreciation
The cost of a fixed asset minus accumulated depreciation is called what
Book Value
Immediately after a used truck is acquired, a new motor is installed at a cost of $5,000. What type of expenditure is this
Capital Expenditure
initial amount paid to the supplier for the fixed asset plus any shipping and necessary cost of acquiring the asset called
Cost
depreciation method that does not use residual value in computing the first year's depreciation expense is
Double-declining-balance
formula for annual depreciation using the straight-line depreciation method is
Depreciable Cost ÷ Estimated Useful Life
systematic periodic transfer of the cost of a fixed asset to an expense account during its expected useful life called
Depreciation
In the journal entry to record depreciation for store equipment, what account is debited
Depreciation Expense
example of an accelerated depreciation method
Double-declining balance
You can continue to record depreciation on a fixed asset as long as the asset is still being used in the business.
False
long-term or relatively permanent tangible assets that are used in the normal business operations called
Fixed Assets
formula for depreciable cost is
Initial Cost - Residual Value
expenditures incurred in connection with acquiring machinery is a proper charge to the asset account
Installation cost
Long-term tangible assets that are owned and held for resale called
Investments
the gain or loss on sale of a fixed asset if a piece of equipment with a book value of $12,000 is sold for $11,500
Loss on disposal of fixed asset of $500
The proper journal entry for the purchase of a computer costing $975 on account to be utilized within the business would be
Office equipment (Debit) 975 Accounts Payable (Credit) 975
method of computing the amount of annual depreciation is used most often in the business world
Straight-line method
company discards machinery that is fully depreciated, this transaction would be journalized as a
debit to Accumulated Depreciation and a credit to Machinery
company sells machinery at a price equal to its book value, this transaction would be journalized as a
debit to Cash and Accumulated Depreciation and a credit to Machinery
method of determining depreciation that yields successive reductions in the periodic depreciation charge over the estimated life of the asset is the
double-declining-balance method
Expected useful life is
estimated at the time that the asset is placed in service
term that refers to the projected value based on what the asset is expected to be worth when the company plans to dispose of it
residual value