Question Details

CHAPTER 10 PART 7  PLANT ASSETS, NATURAL RESOURCES, AND INTANGIBLE ASSETS

101. Which depreciation method is most frequently used in businesses today?
a. Straight-line
b. Declining-balance
c. Units-of-activity
d. Double-declining-balance
102. Wine Company uses the units-of-activity method in computing depreciation. A new plant
asset is purchased for $24,000 that will produce an estimated 100,000 units over its useful
life. Estimated salvage value at the end of its useful life is $2,000. What is the depreciation
cost per unit?
a. $2.20
b. $2.40
c. $.22
d. $.24
103. Units-of-activity is an appropriate depreciation method to use when
a. it is impossible to determine the productivity of the asset.
b. the asset's use will be constant over its useful life.
c. the productivity of the asset varies significantly from one period to another.
d. the company is a manufacturing company.
104. The calculation of depreciation using the declining balance method,
a. ignores salvage value in determining the amount to which a constant rate is applied.
b. multiplies a constant percentage times the previous year's depreciation expense.
c. yields an increasing depreciation expense each period.
d. multiplies a declining percentage times a constant book value.
Use the following information for questions 105-106.
Grey Company purchased a new van for floral deliveries on January 1, 2008. The van cost
$36,000 with an estimated life of 5 years and $9,000 salvage value at the end of its useful life.
The double-declining-balance method of depreciation will be used.
105. What is the depreciation expense for 2008?
a. $7,200
b. $5,400
c. $10,800
d. $14,400
106. What is the balance of the Accumulated Depreciation account at the end of 2009?
a. $5,760
b. $17,280
c. $23,040
d. $8,640
10 - 16 Test Bank for Accounting Principles, Eighth Edition
107. Porter Company purchased equipment for $450,000 on January 1, 2007, and will use the
double-declining-balance method of depreciation. It is estimated that the equipment will
have a 3-year life and a $20,000 salvage value at the end of its useful life. The amount of
depreciation expense recognized in the year 2009 will be
a. $50,000.
b. $30,000.
c. $54,440.
d. $34,440.
108. A plant asset was purchased on January 1 for $50,000 with an estimated salvage value of
$10,000 at the end of its useful life. The current year's Depreciation Expense is $5,000
calculated on the straight-line basis and the balance of the Accumulated Depreciation
account at the end of the year is $25,000. The remaining useful life of the plant asset is
a. 10 years.
b. 8 years.
c. 5 years.
d. 3 years.
109. Equipment was purchased for $60,000. Freight charges amounted to $2,800 and there
was a cost of $8,000 for building a foundation and installing the equipment. It is estimated
that the equipment will have a $12,000 salvage value at the end of its 5-year useful life.
Depreciation expense each year using the straight-line method will be
a. $14,160.
b. $11,760.
c. $9,840.
d. $9,600.
110. Equipment was purchased for $17,000 on January 1, 2008. Freight charges amounted to
$700 and there was a cost of $2,000 for building a foundation and installing the
equipment. It is estimated that the equipment will have a $3,000 salvage value at the end
of its 5-year useful life. What is the amount of accumulated depreciation at December 31,
2009, if the straight-line method of depreciation is used?
a. $6,680
b. $3,340
c. $2,860
d. $5,720
111. A company purchased factory equipment on June 1, 2008, for $48,000. It is estimated that
the equipment will have a $3,000 salvage value at the end of its 10-year useful life. Using
the straight-line method of depreciation, the amount to be recorded as depreciation
expense at December 31, 2008, is
a. $4,500.
b. $2,625.
c. $2,250.
d. $1,875.
112. A plant asset was purchased on January 1 for $40,000 with an estimated salvage value of
$8,000 at the end of its useful life. The current year's Depreciation Expense is $4,000
calculated on the straight-line basis and the balance of the Accumulated Depreciation
account at the end of the year is $20,000. The remaining useful life of the plant asset is
Plant Assets, Natural Resources, and Intangible Assets 10 - 17
a. 10 years.
b. 8 years.
c. 5 years.
d. 3 years.
Use the following information for questions 113-115.
Brinkman Corporation bought equipment on January 1, 2008. The equipment cost $90,000 and
had an expected salvage value of $15,000. The life of the equipment was estimated to be 6
years.
113. The depreciable cost of the equipment is
a. $90,000.
b. $75,000.
c. $50,000.
d. $12,500.
114. The depreciation expense using the straight-line method of depreciation is
a. $17,500.
b. $18,000.
c. $12,500.
d. none of the above.
115. The book value of the equipment at the beginning of the third year would be
a. $90,000.
b. $75,000.
c. $65,000.
d. $25,000.
116. Baden Company purchased machinery with a list price of $32,000. They were given a
10% discount by the manufacturer. They paid $200 for shipping and sales tax of $1,500.
Baden estimates that the machinery will have a useful life of 10 years and a residual value
of $10,000. If Baden uses straight-line depreciation, annual depreciation will be
a. $2,050.
b. $2,036.
d. $3,050.
d. $1,880.
117. Bates Company purchased equipment on January 1, 2008, at a total invoice cost of
$600,000. The equipment has an estimated salvage value of $15,000 and an estimated
useful life of 5 years. What is the amount of accumulated depreciation at December 31,
2009, if the straight-line method of depreciation is used?
a. $120,000
b. $240,000
c. $117,000
d. $234,000
10 - 18 Test Bank for Accounting Principles, Eighth Edition
118. On January 1, a machine with a useful life of five years and a residual value of $15,000
was purchased for $45,000. What is the depreciation expense for year 2 under the
double-declining-balance method of depreciation?
a. $10,800
b. $18,000
c. $14,400
d. $8,640
119. A machine with a cost of $160,000 has an estimated salvage value of $10,000 and an
estimated useful life of 5 years or 15,000 hours. It is to be depreciated using the units-ofactivity
method of depreciation. What is the amount of depreciation for the second full
year, during which the machine was used 5,000 hours?
a. $50,000
b. $30,000
c. $43,333
d. $53,333
120. Equipment with a cost of $240,000 has an estimated salvage value of $15,000 and an
estimated life of 4 years or 15,000 hours. It is to be depreciated using the units-of-activity
method. What is the amount of depreciation for the first full year, during which the
equipment was used 3,300 hours?
a. $60,000
b. $67,800
c. $49,500
d. $56,250