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Exam 17: Depreciation

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Question 41

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Malvern Contractors purchased a new bull-dozer for $85,000. Shipping charges were $1,500 and other costs associated with the bull-dozer amounted to $925. The bull-dozer is expected to last 5 years and has a residual value of $10,000. Malvern elects to use the straight-line method of depreciation. A)What is the amount of total depreciation? B)What is the amount of the annual depreciation?

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Question 42

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The Accelerated Cost Recovery System (ACRS) applies to property first used after ____________________.

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Sundowner Inc. purchased a new drill press for $190,000 having a salvage value of $2,650. The machine is expected to have a useful life of 30,000 hours. Complete the depreciation schedule using the units-of-production method. Sundowner Inc. Depreciation Schedule, Units-of-Production Drill Press−30,000 hours $\begin{array}{c}\begin{array}{lll}\text {End of}\\ \underline{\text {Year}}\\\\1\\2\\3\\4\\5\end{array}\begin{array}{lll}\text {Depreciati on }\\ \underline{\text {per Unit}}\\\\\\\\\\\\\\ \end{array}\begin{array}{lll}\text {Hours}\\ \underline{\text {Used}}\\\\3,200 \\6,600 \\4,800 \\10,200 \\8,600 \end{array}\begin{array}{lll}\text {Annual}\\\underline{\text {Depreciation}}\\\\\\\\\\\\\\\end{array}\begin{array}{lll}\text {Accumulated}\\\underline{\text {Depreciation}}\\\\\\\\\\\\ \\\end{array}\begin{array}{lll}\text {Book}\\\underline{\text { Value }}\\\text { (new)}\\\\\\\\\\\\\end{array}\end{array}$

The ____________________ of an asset is the original cost minus accumulated depreciation.

The price of a laser printer purchased by Paul's Printers and Office Supplies was $713. It cost $27 for delivery. The salvage value at the end of a 5-year life is $65. Prepare a depreciation schedule using the sum-of-the-year's method, then enter the accumulated depreciation at the end of year 4 as your answer.

Complete the schedule as it relates to the declining-balance method of depreciation: $\begin{array} { l l l l } \begin{array} { l } \text {Years}\end{array} & \begin{array} { l } \text { Straight-Line } \\\text { Rate }\end{array} & \text { Multiple } & \begin{array} { l } \text { Declining- } \\\text { Balance Rate }\end{array} \\\hline 10 && 200 \% &\end{array}$

The value of an asset at any given time is called book value. It is calculated by taking the original cost less the accumulated depreciation to that point.​

Rust Industries purchased a wood pulp mixer for $30,000. Using the MACRS method, calculate the book value at the end of year 3. (Round all dollar amounts to the nearest cent)

Santander Fuels purchased a new tank for $265,000. It is expected to last for 5 years and have a salvage value of $25,000. Using the sum-of-the-years' digits method, prepare a depreciation schedule for Santander Fuels. Santander Fuels Tank-SYD Depreciation Schedule $\begin{array}{llllll}\text { End of } & \text { Total } & \text { Depreciation } & \text { Annual } & \text { Accumulated } & \text { Book } \\\text { Year } & \text { Depreciation } & \text { Rate Fraction } & \text { Depreciation } & \text { Depreciation } & \text { Value } \\\hline1\\2\\3\\4\\5\end{array}$

Hopen Manufacturing bought a new machine for $360,000. It is expected to last for 5 years and have a salvage value of $30,000. Prepare a depreciation schedule using the 200% declining-balance method for the machine. Hopen Manufacturing Depreciation Schedule-Machinery 5-year, 200% declining-balance $\begin{array}{llllll}\text { End } & \text { Beginning } & & \text { Deprec. } && \text { Ending } \\\text { of } & \text { Book } & \text { Deprec. } & \text { for } & \text { Accum. } & \text { Book } \\\text { Year } & \text { Value } & \text { Rate } & \text { the Year } & \text { Deprec. } & \text { Value } \\\hline\\&&&&&\text {(new )}\\1\\2\\3\\4\\5\end{array}$

Calculate the total cost, total depreciation, and annual depreciation for the following asset using the straight-line method. $\begin{array} { l l l l l l l l } & & & & &&{ \text { Estimated } } \\& \text { Freight } & \text { Set-up } & \text { Total } & \text { Salvage } & \text { Total } & \text { Useful } & \text { Annual } \\\text { Cost } & \text { Charges } & \text { Charges } & \text { Cost } & \text { Value } & \text { Deprec. } & \text { Life } & \text { Deprec. } \\\$ 745,000 & \$ 2,800 & \$ 15,000 & & \$ 22,015 & & 14 &\end{array}$

The Shaker Warehouse purchased a new conveyor belt for $28,500. The company expected it to last for 4 years and have an estimated salvage value of $5,000. Using the double-declining-balance method of depreciation, what is the amount of depreciation for year 3?

A metal-polishing machine purchased by Mike Steel, Inc. should last 3 years. The purchase price was $36,300. Shipping costs were $363 and initial setup charges were $726. The trade-in value is $11,024. Prepare a depreciation schedule using the 125% declining balance method, then enter the accumulated depreciation at the end of year 2 as your answer. (Round the declining balance rate to 4 decimal places, and all dollar amounts to the nearest cent)

Complete the schedule as it relates to the sum-of-the years' digits method of depreciation: $\begin{array}{c}\text {Sum of the}\quad \text {Depreciation Rate Fraction}\\\begin{array}{llllll} \text { Useful life } &\text {Years' Digits } &\text { Year 1 } & \text {Year 2 } & \text { Year 4} & \\ \text {4 years } &\\\end{array}\end{array}$

Complete the schedule as it relates to the sum-of-the years' digits method of depreciation: $\begin{array}{c}\text {Sum of the}\quad \text {Depreciation Rate Fraction}\\\begin{array}{llllll} \text { Useful life } &\text {Years' Digits } &\text { Year 1 } & \text {Year 3 } & \text { Year 5} & \\ \text {7 years } &\\\end{array}\end{array}$

The German Bakery purchased a new oven for $86,000. The freight charges were $1,600 and installation amounted to $2,000. The oven is expected to last four years and have a salvage value of $6,600. Using the straight-line method of depreciation, prepare a depreciation schedule for this oven. German Bakery Depreciation Schedule Straight-line Method $\begin{array}{c}\begin{array}{lll}\underline{\text {End of Year}}\\\\1 \\2 \\3 \\4 \end{array}\begin{array}{lll}\text {Annual}\\\underline{\text {Depreciation}}\\\\\\\\\\\\ \\\end{array}\begin{array}{lll}\text { Accumulated } \\\underline{\text {Depreciation}}\\\\\\\\\\\\ \\\end{array}\begin{array}{lll}\\\underline{\text {Book Value}}\\\text {(New)}\\\\\\\\\\ \\\end{array}\end{array}$

Calculate the total cost, total depreciation, and annual depreciation for the following asset using the straight-line method. $\begin{array} { l l l l l l l l } & & & & & & { \text { Estimated } } \\& \text { Freight } & \text { Set-up } & \text { Total } & \text { Salvage } & \text { Total } & \text { Useful } & \text { Annual } \\\text { Cost } & \text { Charges } & \text { Charges } & \text { Cost } & \text { Value } & \text { Deprec. } & \text { Life } & \text { Deprec. } \\\$ 225,000 & \$ 1,500 & \$ 25,000 & & \$ 15,010 & & 15 &\end{array}$

The Fluffy Coin Laundry purchased new dryers for $112,000. Freight charges were $640, and installation amounted to $1,200. The dryers are expected to last 5 years and have a residual value of $4,000. The laundry elects to use the double-declining method of depreciation. What is the depreciation for year 2? (Round to the nearest dollar)

The sum-of-the-years' digits and declining-balance methods of calculating depreciation are called ____________________ depreciation methods.

Calculate the total cost, total depreciation, and annual depreciation for the following asset using the straight-line method. $\begin{array} { l l l l l l l l } & & & & & & { \text { Estimated } } \\& \text { Freight } & \text { Set-up } & \text { Total } & \text { Salvage } & \text { Total } & \text { Useful } & \text { Annual } \\\text { Cost } & \text { Charges } & \text { Charges } & \text { Cost } & \text { Value } & \text { Deprec. } & \text { Life } & \text { Deprec. } \\\$ 175,000 & \$ 0 & \$ 13,000 & & \$ 5,000 & & 12 &\end{array}$