Depreciation / Amortization
The estimated life of a building that has been depreciated for 30 of its originally estimated life of 50 years has been revised to a remaining life of 10 years. On the basis of this information the accountant should:
a. continue to depreciate the building over the original 50-year life.
b. depreciate the remaining book value over the remaining life of the asset.
c. adjust accumulated depreciation to its appropriate balance, through net income, based on a 40-year life, and then depreciate the adjusted book value as though the estimated life had always been 40 years.
d. adjust accumulated depreciation to its appropriate balance, through retained earnings, based on a 40-year life, and then depreciate the adjusted book value as though the estimated life had always been 40 years.
depreciate the remaining book value over the remaining life of the asset.
Choi Company purchased machinery on August 1, 2025, for $25,600. The machinery is estimated to have a salvage value of $5,000 after a useful life of 6 years. Compute 2025 depreciation expense using the double-declining-balance method. Round to the nearest cent.
3555.56
Fernandez Corporation purchased a truck at the beginning of 2017 for $50,000. The truck is estimated to have a salvage value of $2,000 and a useful life of 160,000 miles. It was driven 23,000 miles in 2017 and 31,000 miles in 2018. Compute depreciation expense for 2017 and 2018.
2017: (50000-2000)*23000/160000 = 6900
2018: (50000-2000)*31000/160000 = 9300
Oriole Company purchased machinery on October 31, 2025, for $93,000. The machinery is estimated to have a salvage value of $9,600 after a useful life of 8 years. Compute 2025 depreciation expense using the straight-line method.
13900
Plato Corporation purchased a machine with a cost of $165,000 and a salvage value of $9,000 on April 1, 2019. The machine will be depreciated over a 12 year useful life using the sum-of-years’-digits method. The amount of depreciation Plato Corporation would record for the year ended 12/31/20 would be:
22500
Which of the following most accurately reflects the concept of depreciation as used in accounting?
The process of charging the decline in value of an economic resource to income in the period in which the benefit occurred.
The process of allocating the cost of tangible assets to expense in a systematic and rational manner to those periods expected to benefit from the use of the asset.
A method of allocating asset cost to an expense account in a manner which closely matches the physical deterioration of the tangible asset involved.
An accounting concept that allocates the portion of an asset used up during the year to the contra asset account for the purpose of properly recording the fair market value of tangible assets.
The process of allocating the cost of tangible assets to expense in a systematic and rational manner to those periods expected to benefit from the use of the asset
Look at slide 9
Composite Depreciation Rate: 24625/169100 = 0.146 OR 14.6%
Composite Life: 160000/16600 = 9.639 = 9.6Years
Crane Company purchased a new plant asset on April 1, 2025, at a cost of $817,000. It was estimated to have a service life of 18 years and a salvage value of $47,100. Crane’ accounting period is the calendar year. Compute the depreciation for this asset for 2025 and 2026 using the sum-of-the-years'-digits method.
77665.36
Concord Corporation incurred the following costs in 2017:
Cost of laboratory research aimed at discovery of new knowledge $135,000
Cost of testing in search for product alternatives $110,000
Cost of engineering activity required to advance the design of a product to the manufacturing stage $258,000
Prepare the necessary 2017 journal entry or entries for Concord.
Dr. Research and Development Expense $1,060,000
Cr. Cash 1,060,000
The Archer Company purchased a tooling machine in 2010 for $30,000. The machine was being depreciated on the straight-line method over an estimated useful life of 20 years, with no salvage value. At the beginning of 2020, when the machine had been in use for 10 years, the company paid $5,000 to overhaul the machine. As a result of this improvement, the company estimated that the useful life of the machine would be extended an additional 5 years. What should be the depreciation expense recorded for this machine in 2020?
30000/20*10 = 15000
(15000+5000) / 15= 1333.33
Sheffield Company purchased equipment for $327,100 on October 1, 2025. It is estimated that the equipment will have a useful life of 8 years and a salvage value of $18,000. Estimated production is 46,000 units and estimated working hours are 35,000. During 2025, Sheffield uses the equipment for 1700 hours and the equipment produces 800 units.
Compute depreciation expense under Activity method (working hours) for 2025. Sheffield is on a calendar-year basis ending December 31.
15013.43
Which of the following legal fees should be capitalized?
Legal fees to obtain a copy right
Legal fees to successfully defend a trademark
Both
Swifty Company purchases equipment on January 1, Year 1, at a cost of $784,000. The asset is expected to have a service life of 8 years and a salvage value of $34,400. Compute the amount of depreciation for each of Years 1 through 3 using the double-declining-balance method. (Round depreciation rate to 2 decimal places, e.g. 15.84% and final answers to 0 decimal places, e.g. 45,892.)
Double declining rate:⅛*2 = 0.25
Year 1: 784000*0.25 = 196000
Year 2: (784000-19600)*0.25 = 191100
Year 3:(784000-19600-191100)*0.25 = 143325
Sheffield Company purchased equipment for $327,100 on October 1, 2025. It is estimated that the equipment will have a useful life of 8 years and a salvage value of $18,000. Estimated production is 46,000 units and estimated working hours are 35,000. During 2025, Sheffield uses the equipment for 1700 hours and the equipment produces 800 units.
Compute depreciation expense under Double-declining-balance method for 2026. Sheffield is on a calendar-year basis ending December 31.
2025: 0.25 x 327100 x 3/12 =20443.75
2026: 0.25 x (327100-14825) = 78068.75
Crane Mining Company purchased land on February 1, 2025, at a cost of $997,500. It estimated that a total of 57,800 tons of mineral was available for mining. After it has removed all the natural resources, the company will be required to restore the property to its previous state because of strict environmental protection laws. It estimates the fair value of this restoration obligation at $108,400. It believes it will be able to sell the property afterwards for $137,000. It incurred developmental costs of $316,000 before it was able to do any mining. In 2025, resources removed totaled 39,900 tons. The company sold 26,500 tons.
Compute the per unit mineral cost of 2025, total material cost of December 31, 2025, total material cost in cost of goods sold at December 31, 2025.
Depletion Base: 997500+108400-137000+316000 = 1284900
Depletion Rate: 1284900 / 57800 = 22.23
Per Unit Mineral Cost: 22.23
12/31/25 Inventory 22.23 * (39900-26500) = 297882
COGS of 2025: 22.23*26500 = 589095