ch 7
The formula to calculate the depreciation for the units-of-production method (activity-based depreciation) is ((cost - residual value)/total estimated production) x ______.
current-year activity or production
The formula to calculate an activity-based depreciation rate is:
(cost - residual value)/estimated total production.
Which depreciation methods allocate the cost of long-term assets based on time?
straight line, declining balance
True or false: The initial cost of property, plant, and equipment includes the purchase price and all expenditures necessary to bring the asset to its desired condition and location for use.
t
The depreciable cost is
the cost of the asset minus the residual value.
the allocation of the cost of an intangible asset is referred to as
amortization
The gain or loss on disposal of an asset is calculated as:
amount received less the book value of asset sold
Wall Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $100,000, and its accumulated depreciation at the date of exchange was $60,000. The new asset received had a fair value of $80,000 and a book value of $65,000. The journal entry to record this exchange will include which of the following entries?
Debit accumulated depreciation $60,000 Credit gain on exchange of asset $40,000 Debit equipment $80,000 Credit equipment $100,000
Cheng Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $90,000, and its accumulated depreciation at the date of exchange was $40,000. The new equipment received had a fair value of $40,000 and a book value of $35,000. The journal entry to record this exchange will include which of the following entries?
Debit equipment $40,000 Debit loss on exchange $10,000 Credit equipment $90,000 Debit accumulated depreciation $40,000
Krasel Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $90,000, and its accumulated depreciation at the date of exchange was $70,000. The new asset received had a fair value of $50,000 and a book value of $45,000. The journal entry to record this exchange will include which of the following entries?
Debit equipment $50,000 Credit gain on exchange of asset $30,000 Credit equipment $90,000 Debit accumulated depreciation $70,000
The formula for calculating the double-declining-balance method is
book value at beginning of year x 2/estimated service life
The allocation of the cost of a tangible fixed asset is referred to as
depreciation
