Depreciation MCQs

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A new machine has an initial cost of $300,000, an estimated useful life of 2,000 hours of use over a 3-year period, and an estimated residual value of...






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A company uses straight-line depre accelerated depreciation for tax purposes. Which of the following account balances would be lower in the financial ...






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All of the following would be included as part of the cost of a depreciable asset except the






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Basic Brick, Inc., purchased manufacturing equipment for $100,000, with an estimated useful life of 10 years and a salvage value of $15,000. The secon...






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Equipment bought by Wilson Steam Generating Company 3 years ago was charged to equipment expense in error. The cost of the equipment was $100,000, wit...






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Lakeside Electric purchased a truck for $38,600 to transport equipment to various job sites. For this purpose, storage bins were welded to the truck b...






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Albright Company uses the sum-of-the-years’-digits (SYD) method of depreciation. On January 1, the company purchased a machine for $50,000. It had ...






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When a fixed plant asset with a 5-year estimated useful life is sold during the second year, how would the use of an accelerated depreciation method ...






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Which one of the following methods of depreciation will result in the lowest reported net income in the early life of a depreciable asset?






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Silken, Inc., a distributor of silk goods, is in its first year of operation. The company has purchased ten computers at $3,500 each with an estimate...






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In which of the following situations is the units-of-production method of depreciation most appropriate?






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Under IFRS, according to the revaluation model, an item of property, plant, and equipment must be carried at






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An entity sells a piece of machinery, for cash, prior to the end of its estimated useful life. The sale price is less than the carrying amount of the...






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An entity purchased a machine for $700,000. The machine was depreciated using the straight-line method and had a residual value of $40,000. The machi...






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What is the journal entry recorded upon the sale of an item of property, plant, and equipment (PPE) that was sold for cash in excess of its carrying ...






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An entity sold a depreciable asset in the middle of the fifth year of its estimated 10-year useful life. The original cost of the asset was $100,000, ...






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To determine whether to recognize the impairment of a depreciable fixed asset, a company must compare the






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An entity purchased a machine on January 1, Year 1, for $1,000,000. The machine had an estimated useful life of 9 years and a residual value of $100,0...






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The factors that need to be determined to compute depreciation are an asset’s:






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The depreciable base for an asset is:






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Depreciation, depletion, and amortization:






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Depreciation:






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Assuming an asset is used evenly over a four-year service life, which method of depreciation will always result in the largest amount of depreciation ...






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In the first year of an asset’s life, which of the following methods has the smallest depreciation?






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An asset acquired January 1, 2011, for $15,000 with an estimated 10-year life and no residual value is being depreciated in an equipment group asset a...






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Cutter Enterprises purchased equipment for $72,000 on January 1, 2011. The equipment is expected to have a five-year life and a residual value of $6,0...






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Cutter Enterprises purchased equipment for $72,000 on January 1, 2011. The equipment is expected to have a five-year life and a residual value of $6,0...






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Cutter Enterprises purchased equipment for $72,000 on January 1, 2011. The equipment is expected to have a five-year life and a residual value of $6,0...






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Cutter Enterprises purchased equipment for $72,000 on January 1, 2011. The equipment is expected to have a five-year life and a residual value of $6,0...






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Cutter Enterprises purchased equipment for $72,000 on January 1, 2011. The equipment is expected to have a five-year life and a residual value of $6,0...






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Cutter Enterprises purchased equipment for $72,000 on January 1, 2011. The equipment is expected to have a five-year life and a residual value of $6,0...






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Cutter Enterprises purchased equipment for $72,000 on January 1, 2011. The equipment is expected to have a five-year life and a residual value of $6,0...






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Cutter Enterprises purchased equipment for $72,000 on January 1, 2011. The equipment is expected to have a five-year life and a residual value of $6,0...






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On June 30, 2011, Prego Equipment purchased a precision laser-guided steel punch that has an expected capacity of 300,000 units and no residual value....






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On June 30, 2011, Prego Equipment purchased a precision laser-guided steel punch that has an expected capacity of 300,000 units and no residual value....






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Archie Co. purchased a framing machine for $45,000 on January 1, 2011. The machine is expected to have a four-year life, with a residual value of $5,0...






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Archie Co. purchased a framing machine for $45,000 on January 1, 2011. The machine is expected to have a four-year life, with a residual value of $5,0...






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Archie Co. purchased a framing machine for $45,000 on January 1, 2011. The machine is expected to have a four-year life, with a residual value of $5,0...






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Archie Co. purchased a framing machine for $45,000 on January 1, 2011. The machine is expected to have a four-year life, with a residual value of $5,0...






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Archie Co. purchased a framing machine for $45,000 on January 1, 2011. The machine is expected to have a four-year life, with a residual value of $5,0...






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Archie Co. purchased a framing machine for $45,000 on January 1, 2011. The machine is expected to have a four-year life, with a residual value of $5,0...






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On September 30, 2011, Bricker Enterprises purchased a machine for $200,000. The estimated service life is 10 years with a $20,000 residual value. Bri...






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On September 30, 2011, Bricker Enterprises purchased a machine for $200,000. The estimated service life is 10 years with a $20,000 residual value. Bri...






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On September 30, 2011, Bricker Enterprises purchased a machine for $200,000. The estimated service life is 10 years with a $20,000 residual value. Bri...






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On September 30, 2011, Bricker Enterprises purchased a machine for $200,000. The estimated service life is 10 years with a $20,000 residual value. Bri...






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On September 30, 2011, Bricker Enterprises purchased a machine for $200,000. The estimated service life is 10 years with a $20,000 residual value. Bri...






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Jennings Advertising Inc. reported the following in its December 31, 2011, balance sheet: Equipment........................................$500,000 ...






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Gulf Consulting Co. reported the following on its December 31, 2011, balance sheet: Equipment (at cost).....$700,000 In a disclosure note, Gulf indi...






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Asset C3PO has a depreciable base of $16.5 million and a service life of 10 years. What would the accumulated depreciation be at the end of year five ...






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On March 31, 2011, M. Belotti purchased the right to remove gravel from an old rock quarry. The gravel is to be sold as roadbed for highway constructi...






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On March 31, 2011, M. Belotti purchased the right to remove gravel from an old rock quarry. The gravel is to be sold as roadbed for highway constructi...






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On March 31, 2011, M. Belotti purchased the right to remove gravel from an old rock quarry. The gravel is to be sold as roadbed for highway constructi...






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Short Corporation purchased Hathaway, Inc. for $52,000,000. The fair value of all Hathaway’s identifiable tangible and intangible assets was $48,000...






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Granite Enterprises acquired a patent from Southern Research Corporation on 1/1/11 for $4 million. The patent will be used for five years, even though...






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In January of 2011, Vega Corporation purchased a patent at a cost of $200,000. Legal and filing fees of $50,000 were paid to acquire the patent. The c...






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Accounting for a change in the estimated service life of equipment:






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A change in the estimated useful life and residual value of machinery in the current year is handled as:






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Nanki Corporation purchased equipment on 1/1/09 for $650,000. In 2009 and 2010, Nanki depreciated the asset on a straight-line basis with an estimated...






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Fellingham Corporation purchased equipment on January 1, 2009, for $200,000. The company estimated the equipment would have a useful life of 10 years ...






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A change from the straight-line method to the sum-of-years’-digits method of depreciation is handled as:






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Murgatroyd Co. purchased equipment on 1/1/09 for $500,000, estimating a four-year useful life and no residual value. In 2009 and 2010, Murgatroyd depr...






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Broadway Ltd. purchased equipment on 1/1/09 for $800,000, estimating a five-year useful life and no residual value. In 2009 and 2010, Broadway depreci...






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On January 1, 2009, Al’s Sporting Goods purchased store fixtures at a cost of $180,000. The anticipated service life was 10 years with no residual v...






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An asset should be written down if there has been an impairment of value that is:






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Recognition of impairment for property, plant and equipment is required if book value exceeds:






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The amount of impairment loss is the excess of book value over:






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Accounting for impairment losses:






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In testing for recoverability of property, plant and equipment, an impairment loss is required if the:






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At the end of its 2011 fiscal year, a triggering event caused Janero Corporation to perform an impairment test for one of its manufacturing facilities...






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Fryer Inc. owns equipment for which it paid $90 million. At the end of 2011, it had accumulated depreciation on the equipment of $27 million. Due to a...






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Wilson Inc. owns equipment for which it paid $70 million. At the end of 2011, it had accumulated depreciation on the equipment of $12 million. Due to ...






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Jung Inc. owns a patent for which it paid $66 million. At the end of 2011, it had accumulated amortization on the patent of $16 million. Due to advers...






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In 2010, Antle Inc. had acquired Demski Co. and recorded goodwill of $245 million as a result. The net assets (including goodwill) from Antle’s acqu...






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Which of the following types of subsequent expenditures normally is capitalized?






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A major expenditure increased a truck’s life beyond the original estimate of life. GAAP permits the expenditure to be debited to:






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The replacement of a major component increased the productive capacity of production equipment from 10 units per hour to 18 units per hour. The expend...






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Calloway Shoes purchased a delivery truck on September 30, 2011, for $32,000. The estimated useful life of the truck is 10 years with no residual valu...






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Robertson Inc. prepares its financial statements according to International Financial Reporting Standards. At the end of its 2011 fiscal year, the com...






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Rice Industries owns a manufacturing plant in a foreign country. Political unrest in the country indicates that Rice should investigate for possible i...






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Kingston Corporation has $95 million of goodwill on its books from the 2009 acquisition of Reliant Motors. At the end of its 2011 fiscal year, managem...






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According to International Financial Reporting Standards, the revaluation of equipment when fair value exceeds book value, results in:






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According to International Financial Reporting Standards, biological assets are valued at:






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According to International Financial Reporting Standards, the impairment loss for property, plant, and equipment is the difference between book value ...






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According to International Financial Reporting Standards, the level of testing for goodwill impairment is the:






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The normal treatment of litigation costs to successfully defend an intangible right under U.S. GAAP and International Financial Reporting Standards (I...






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Canliss Mining uses the retirement method to determine depreciation on its office equipment. During 2009, its first year of operations, office equipme...






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Canliss Mining uses the replacement method to determine depreciation on its office equipment. During 2009, its first year of operations, office equipm...






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Red Corp. constructed a machine at a total cost of $70 million. Construction was completed at the end of 2014 and the machine was placed in service at...






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Mobic Inc. acquired some manufacturing equipment in January 2015 for $400,000 and depreciated it $40,000 each year for three years on a straight-line ...






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Which of the following is not a change in accounting principle that usually is accounted for by retrospectively revising prior financial statements?






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Venice Company purchased a gondola for $440,000 (no residual value) at the beginning of 2015. The gondola was being depreciated over a 10-year life us...






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SkiPark Company purchased a gondola for $440,000 (no residual value) at the beginning of 2015. The gondola was being depreciated over a 10-year life u...






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Prior to 2018, Trapper John Inc. used sum-of-the-years’-digits depreciation on its store equipment. Beginning in 2018, Trapper John decided to use s...






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Lundholm Company purchased a machine for $100,000 on January 1, 2016. Lundholm depreciates machines of this type by the straight-line method over a 10...






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In 2018, internal auditors discovered that Fay, Inc., had debited an expense account for the $700,000 cost of a machine purchased on January 1, 2015. ...






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An item that should be reported as a prior period adjustment is the: