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Exam 17: Depreciation

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Question 51

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Relatively fixed or permanent assets such as land, buildings, tools, equipment, and vehicles that companies acquire in the course of operating a business is referred to as short-term or current assets.​

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Question 52

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An IRS prescribed percentage that is multiplied by the original basis of an asset to determine the depreciation deduction for a given year. Based on property class and the life of the asset.​

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Question 53

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Plethora Farms purchased a greenhouse for $52,700. Delivery costs totaled $1,825 and handling costs were $3,000. The useful life is 10 years and the salvage value is $14,050. Using the straight-line depreciation method, calculate the book value at the end of year 4.

Lackawanna Community College purchased a computer system for $12,730. Delivery costs totaled $300 and handling costs were $214. The useful life is 4 years and the salvage value $4,082. Prepare a depreciation schedule using the sum-of-the-year's method, then enter the book value at the end of year 3 as your answer.

To calculate the declining balance depreciation use the following formula: ? $\text { Declining Balance Rate } = \frac { 1 } { \text { Useful Life } } \times \text { Multiple }$ Then multiply the declining balance rate by the current value of the asset.

The Lions Minor League baseball franchise purchased 5 batting cages for a total of $102,500. They are expected to have a 7 year useful life and a trade-in value of $5,000. Using the 150% declining-balance method of depreciation, what is the book value at the end of the first year?

____________________ is the proportional allocation of the cost of natural resources to the units used up or depleted per accounting period.

Joseph Engineering purchased a new stamping machine for $175,000 with a salvage value of $14,200. The machine is expected to have a useful life of 600,000 units of production. At the end of year 5, the machine had produced 580,000 units. In year 6, it produced 116,000 units. What was the amount of depreciation for year 6?

East Park Corporation purchased a new playground set for $35,500. Freight and installation charges amounted to $3,100. For depreciation purposes, the playground set is expected to have a useful life of 27,000 hours and an estimated salvage value of $4,100. What is the depreciation per unit? (Round to the nearest cent)

Software Unlimited purchased a computer screen projector for $7,852. Delivery costs totaled $141 and handling costs were $196. The useful life is 5 years and the salvage value $1,334. Prepare a depreciation schedule using the sum-of-the-year's method, then enter the book value at the end of year 4 as your answer.

Complete the schedule as it relates to the units-of-production method of depreciation (round to the nearest cent): $\begin{array}{c}\begin{array}{lll}\\\underline{\text {Asset}}\\\text {truck} \end{array}\begin{array}{lll}\\\underline{\text { Cost }}\\\$23,000\end{array}\begin{array}{lll}\text { Salvage }\\\underline{\text { Value }}\\\$1,400\end{array}\begin{array}{lll}\text { Units of } \\\underline{\text { Useful Life }}\\30,000\text { miles}\end{array}\begin{array}{lll} \text { Depreciation } \\ \underline{\text { per Unit }}\\\\\end{array}\end{array}$

Complete the schedule as it relates to the declining-balance method of depreciation: $\begin{array} { l l l l } \begin{array} { l } \text {Years}\end{array} & \begin{array} { l } \text { Straight-Line } \\\text { Rate }\end{array} & \text { Multiple } & \begin{array} { l } \text { Declining- } \\\text { Balance Rate }\end{array} \\\hline 4 & & 150 \% &\end{array}$

The decrease in value from the original cost of a long-term asset over its useful life is known is depreciation.​

​Salt Water Taffy Co. purchased pulling equipment for $40,000. The equipment has a useful life of 5 years and salvage value of $10,000. Using the sum of the digits method, the depreciation deduction for the first year is $10,000. ​ ​

The number of years allowed under ACRS and MACRS to depreciate the cost of the asset is known as the ____________________ period.

Summer leisure Unlimited purchased a color laser printer for $1,194. Delivery costs totaled $47 and handling costs were $77. The useful life is 5 years and the salvage value is $298. Using the sum-of-the-years' digit depreciation method, calculate the book value at the end of year 2.

Protection Inc. purchased a fireproof safe for $3,850. Delivery costs totaled $134. The salvage value is $924 after 7 years. Using the 125% declining-balance depreciation method, calculate the book value at the end of year 1. (Round the declining-balance rate to 4 decimal places, and all dollar amounts to the nearest cent)

Sutton Fabricators purchased 50 executive desks for $3,500. Delivery costs totaled $98 and handling costs were $59. The salvage value is $375 after 5 years. Using the double-declining-balance method, calculate the book value at the end of year 2. (Round the declining-balance rate to 4 decimal places, and all dollar amounts to the nearest cent)

Straight-line depreciation is the most widely used method of calculating depreciation in business today.​

Complete the schedule as it relates to the sum-of-the years' digits method of depreciation: $\begin{array}{c}\text {Sum of the}\quad \text {Depreciation Rate Fraction}\\\begin{array}{llllll} \text { Useful life } &\text {Years' Digits } &\text { Year 1 } & \text {Year 3 } & \text { Year 5} & \\ \text {10 years } &\\\end{array}\end{array}$