Question

92. The units-of-activity method is generally not suitable for

a.   airplanes.

b.   buildings.

c.   delivery equipment.

d.   factory machinery.

     

     

Use the following information for questions 99–100.

On October 1, 2008, Dole Company places a new asset into service. The cost of the asset is $60,000 with an estimated 5-year life and $15,000 salvage value at the end of its useful life.

99.     What is the depreciation expense for 2008 if Dole Company uses the straight-line method of depreciation?

a.   $2,250

b.   $12,000

c.   $3,000

d.   $6,000

100.     What is the book value of the plant asset on the December 31, 2008, balance sheet assuming that Dole Company uses the double-declining-balance method of depreciation?

a.   $39,000

b.   $45,000

c.   $54,000

d.   $57,000

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

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

Answer 1

92)	It's not suitable for buildings since buildings involve no activity

99)	Cost			$    60,000.00
	Salvage Value			$    15,000.00
	Depreciable cost			$    45,000.00
	Estimated life			5	years
	Depreciation Expense per year			$      9,000.00
	Depreciation Expense for 2008			$ 9000 x 3/12
			=	$      2,250.00

100)	Estimated life			5	years
	Rate of depreciation		(100% / 5) x 2 = 40%
	Depreciation Expense for 2008			$ 60000 x 40% x 3/12
			=	$      6,000.00
	Book value of plant on Dec 31			$ 60000 - $ 6000
			=	$    54,000.00

102)	Cost			$    24,000.00
	Salvage Value			$      2,000.00
	Depreciable Cost			$    22,000.00
	Estimated units			100000
	Depreciation cost per unit			$              0.22

105)	Estimated life			5	years
	Rate of depreciation		(100% / 5) x 2 = 40%
	Depreciation Expense for 2008			$ 36000 x 40%
			=	$   14,400.00

106)	Depreciation Expense for 2008			$    14,400.00
	Depreciation Expense for 2009			($ 36000 - $ 14400) x 40%
			=	$      8,640.00
	Accumulated depreciation			$ 14400 + $ 8640
	on 2009		=	$   23,040.00