Question

Question 2 A. Mava Corp. purchased a warehouse for $3,040,000 on October 1, 2017. The warehouse has been depreciated using the sum-of-the-years’-digits method with the estimated usage summarized below: Useful life 20 years Residual value $ 205,000

Required:

A1. Calculate the depreciation expense for the first full year of the warehouse’s useful life from October 1, 2017, to September 30, 2018.

A2. Calculate the depreciation expense for the second full year of the warehouse’s useful life from October 1, 2018, to September 30, 2019.

A3. Calculate the depreciation expense for the year ended December 31, 2018.

B. Information related to trucks owned by Macy Corp. at December 31, 2019, is presented below. Cost $7,000,000 Accumulated depreciation to date 1,500,000 Value-in-use 5,000,000 Fair value less cost of disposal 4,400,000

Required:

B1. Determine any impairment loss for the trucks on December 31, 2019.

B2. Prepare the journal entry to record the impairment loss.

C. Read each statement below carefully. On the answer sheet, put a T in the blanket if the statement is TRUE. Put an F in the blanket if the statement is FALSE.

C1. Intangible assets derive their value from the right (claim) to receive cash in the future.

C2. All research phase and development phase costs are expensed as incurred.

C3. Capitalization of research phase costs begins once the project is economically viable.

C4. Companies are required to assess the estimated useful life and salvage value of intangible assets at least annually.

C5. Impairment testing is conducted annually for both limited-life and indefinite-life intangible assets.

Answer 1

The sum of years' digits method is a form of accelerated depreciation that is based on the assumption that the productivity of the asset decreases with the passage of time. Under this method, a fraction is computed by dividing the remaining useful life of the asset on a particular date by the sum of the year's digits.