Question

1. Peavey Enterprises purchased a depreciable asset for $23,000 on April 1, Year 1. The asset will be depreciated using the straight-line method over its four-year useful life. Assuming the asset's salvage value is $2,200, Peavey Enterprises should recognize depreciation expense in Year 2 in the amount of:

Multiple Choice

• $19,933.33

• $5,750.00

• $20,800.00

• $4,333.33

• $5,200.00

2. Mohr Company purchases a machine at the beginning of the year at a cost of $38,000. The machine is depreciated using the double-declining-balance method. The machine’s useful life is estimated to be 5 years with a $7,000 salvage value. Depreciation expense in year 2 is:

Multiple Choice

• $15,200.

• $22,800.

• $7,600.

• $9,120.

• $12,400

3. Mohr Company purchases a machine at the beginning of the year at a cost of $28,000. The machine is depreciated using the straight-line method. The machine’s useful life is estimated to be 5 years with a $2,000 salvage value. Depreciation expense in year 2 is:

Multiple Choice

• $5,600.

• $5,200.

• $11,200.

• $0.

• $26,000.

4. Phoenix Agency leases office space. On January 3, Phoenix incurs $72,000 to improve the leased office space. These improvements are expected to yield benefits for 8 years. Phoenix has 6 years remaining on its lease. Compute the amount of expense that should be recorded the first year related to the improvements.

Multiple Choice

• $15,500.

• $12,000.

• $18,500.

• $9,000.

• $6,500.

5. A company purchased a weaving machine for $298,810. The machine has a useful life of 8 years and a residual value of $16,500. It is estimated that the machine could produce 763,000 bolts of woven fabric over its useful life. In the first year, 111,500 bolts were produced. In the second year, production increased to 115,500 units. Using the units-of-production method, what is the amount of depreciation expense that should be recorded for the second year?

Multiple Choice

• $83,990.

• $42,735.

• $41,255.

• $45,233.

• $43,666.

6. Martin Company purchases a machine at the beginning of the year at a cost of $78,000. The machine is depreciated using the straight-line method. The machine’s useful life is estimated to be 5 years with a $4,000 salvage value. The book value of the machine at the end of year 5 is:

Multiple Choice

• $14,800.

• $74,000.

• $4,000.

• $0.

• $31,200.

7. Martin Company purchases a machine at the beginning of the year at a cost of $155,000. The machine is depreciated using the double-declining-balance method. The machine’s useful life is estimated to be 4 years with a $12,900 salvage value. The machine’s book value at the end of year 3 is:

Multiple Choice

• $135,625.

• $19,375.

• $77,500.

• $116,250.

• $17,756.

Answer 1

Question 1:

Answer : $5200.00

Calculation:

Straight line depreciation expense = (Cost -salvage value) / Useful life

Year 1 - Depreciation Expense = ($23000 - $2200) / 4 years * 9 /12 = $3900

Year 2 - Depreciation Expense = ($23000 - $2200) / 4 years * 12 /12 = $5200.00

Question 2:

Answer : $9120.00

Calculation:

Double declining balance depreciation expense = (Cost - accumulated depreciation) * 2 * straight line Depreciation rate

Depreciation rate = 1 / 5 years * 100 = 20%

Year 1 - Depreciation Expense = ($38000 - $0) * 2 * 20% = $15200

Year 2 - Depreciation Expense = ($38000 - $15200) * 2 * 20% = $9120.00

Question 3:

Answer : $5200.00

Calculation:

Straight line depreciation expense = (Cost -salvage value) / Useful life

Year 1 - Depreciation Expense = ($28000 - $2000) / 5 years * 12 /12 = $5200

Year 2 - Depreciation Expense = ($28000 - $2000) / 5 years * 12 /12 = $5200

Question 4:

Answer : $12000.00

Calculation:

Amortization expense = Cost / Remaining length of lease

The amount of expenses that should be recorded the first year related to the improvements

$72000 / 6 years = $12000.00

Question 5:

Answer : $42735.00

Units of production method = (Cost - salvage value) / Estimated total units to be produced * Actual Units produced

Depreciation Expense Year 1: ($298810 - $16500) / 763000 units * 111500 units = $41255

Depreciation Expense Year 2: ($298810 - $16500) / 763000 units * 115500 units = $42735

Question 6:

Answer : $4000.00

Calculation:

Straight line depreciation expense = (Cost -salvage value) / Useful life

Depreciation Expense = ($78000 - $4000) / 5 years = $14800

Book Value at the end of Year 5 = $78000 - ($14800 * 5) = $4000.00

Question 7:

Answer : $19375.00

Calculation:

Double declining balance depreciation expense = (Cost - accumulated depreciation) * 2 * straight line Depreciation rate

Depreciation rate = 1 / 4 years * 100 = 25%

Year 1 Depreciation expense = $155000 * 2 * 25% = $77500

Year 2 Depreciation expense = ($155000 - $77500) * 2 * 25% = $38750

Year 3 Depreciation expense = ($155000 - $116250) * 2 * 25% = $19375

Year	Cost	Depreciation	Accumulated depreciation	Book Value at the year end
1	$155000	$77500	$77500	$77500
2	$155000	$38750	$116250	$38750
3	$155000	$19375	$135625	$19375

All the best...