Depreciation

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Depreciation Questions and Answers

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XYZ Machining Inc. is considering the purchase of a new milling machine at a cost of $18,000. The machine is expected to have a service life of eight years and a salvage value of $2,500. Develop th...
A machine costing $211,000 with a four-year life and an estimated $15,000 salvage value is installed in Luther Companys factory on January 1. The factory manager estimates the machine will produce...
The following data relate to the Machinery account of Eshkol, Inc. at December 31, 2014. Machinery A B C D ; Original cost $57,960 $64,260 $100,800 $100,800 ; Year purchased 2009 2010 2011 20
At the beginning of the fiscal year, G&J Company acquired new equipment at a cost of $100,000. The equipment has an estimated life of five years and an estimated salvage value of $10,000. (a) Deter...
Mike Devereaux Company shows the following entries in its Equipment account for 2015. All amounts are based on historical cost. Equipment 2015 2015 Jan. 1 Balance 150,600 June 30 Cost of eq...
Nagy Company negotiates a lump-sum purchase of several assets from a contractor who is relocating. The purchase is completed on January 1, 2015, at a total cash price of $1,800,000 for a building,...
A company is considering constructing a plant to manufacture a proposed new product.The land costs $300,000, the building costs $550,000, the equipment costs $250,000, and $150,000 additional worki...
A machine costing $206,400 with a four-year life and an estimated $16,000 salvage value is installed in Luther Company?s factory on January 1. The factory manager estimates the machine will produce...
Assume that a project owner is evaluating the alternatives of depreciating a new building over either a life of 15 years or 30 years. The straight depreciation method is to be used. The project own...
Boscan Corporation purchased machinery on January 1, 2014, at a cost of $335,000. The estimated useful life of the machinery is 4 years, with an estimated salvage value at the end of that period of...
Given the following information for O'Hara Marine Co., calculate the depreciation expense: Sales = $91,000 Costs = $45,300 Addition to retained earnings = $14,300 Dividends paid = $3,520 Inter...
A company purchased a machine for 5,000. It is depreciated at a rate of 20% using the Reducing Balance Method. What would be the remaining Net Book Value after 2 years?
Airline X depreciates its airplanes over a 15-year period and estimates a salvage value of 10% of the cost of the plane. At the same time, Airline Y depreciates identical airplanes over a 25-year p...
Indicate which of the following accounting policies are conservative. Assume inflationary conditions exist. a. Accelerated depreciation method b. Straight-line depreciation method c. A relatively s...
Cambridge Company purchased a truck on January 1, 2018. Cambridge paid $15,000 for the truck. The truck is expected to have a $3,000 residual value and a 4-year life. Cambridge has a December 31 f...
1. How does the depreciation tax shield work, and how does it affect capital budgeting decisions? 2. What kinds of businesses will most benefit from the depreciation tax shield?
Marin Company is in the process of preparing its financial statements for 2017. Assume that no entries for depreciation have been recorded in 2017. The following information related to the deprecia...
The following transactions occurred during 2017. Assume that depreciation of 11% per year is charged on all machinery and 4% per year on buildings, on a straight-line basis, with no estimated resid...
The following transactions occurred during 2017at Partel's inc company. Assume that depreciation of 10% per year is charged on all machinery and 5% per year on buildings, on a straight-line basis,...
A manufacturer of aerospace products purchased four flexible assembly cells for $500,000 each. Delivery and insurance charges were $38,000, and installation of the cells csot another $52,000. Exerc...
Urban's Pizza bought a used Toyota delivery van on January 2, 2014, for $18,000. The van was expected to remain in service for four years (41,750 miles). At the end of its useful life, Urban's offi...
Fixed Asset Transactions and Reporting A partial portion of the balance sheet at December 31, 2012, for the Gusto Corporation is presented below: The following transactions occurred during 2013: On...
Jim owns a very large cattle ranch. A large part of his business is the production and raising of breeding cattle. Jim was told that under MACRS he is entitled to cost recovery on breeding cattle....
Assume the Chicago Bears are sold for $260 million. a) If there is a 35% flat tax rate, how much would a double-declining balance depreciation of the player payroll increase their after-tax profi...
Depreciation Methods: Wendy's boss wants to use straight-line depreciation for the new expansion project because he said it will give higher net income in earlier years and give him a larger bonus....
On July 1, 2014, The Vadar Company purchased 3 assets as described below : i. Millenium Falcon cost $900,000, life 10 years, $100,000 salvage value. ii. Jedi Sword cost $80,000, life 12 years,...
Rembrandt Company acquired a plant asset at the beginning of Year 1. The asset has an estimated service life of 5 years. An employee has prepared deprecia
Nasoff Company operates a small manufacturing facility as a supplement to its regular service activities. At the beginning of 2011, an asset account for the company showed the following balances: D...
Asphalt Pavers, Inc. purchases a loader to use at its asphalt plant. The purchase price delivered is $325,000. Tires for this machine cost $35,000. The company believes it can sell the loader after...
Piccadilly Pizza bought a used Toyota delivery van on January 2, 2016, for $19,200. The van was expected to remain in service for four years (71,200 miles). At the end of its useful life, Piccadill...
An asset costs $840,000 and will be depreciated in a straight-line manner over its three-year life. It will have no salvage value. The lessor can borrow at 5.8 percent and the lessee can borrow at...
Pat Delaney Company leases an automobile with a fair value of $13,060 from John Simon Motors, Inc., on the following terms. 1. Non-cancelable term of 54 months. 2. Rental of $280 per month (at en...
Stellar Delivery Service had the following transactions related to its delivery truck: Year 1 Mar. 1 Purchased for $32,500 cash a new delivery truck with an estimated usefu
You have just landed an accounting position with a national telecommunications company. Because this is your first job you are eager to please your coworkers and your supervisor who works closely w...
A number of major structural repairs completed at the beginning of the current fiscal year at a cost of $1,000,000 are expected to extend the life of a building 10 years beyond the original estimat...
An inspecting and profiling web controller that costs $40,000 has a life of 8 years with a $5000 salvage value. The estimated annual operating and maintenance cost is $3700 per year. Use classical...
Assume that MHS purchased two additional pieces of equipment on April 1 (the first day of its fiscal year), as follows: 1. The laboratory equipment cost $300,000 and has an expected life of = year...
Waterway Industries purchased a truck at the beginning of 2017 for $109,300. The truck is estimated to have a salvage value of $4,900 and a useful life of 116,000 miles. It was driven 21,000 miles...
What are flow variables in economics?
What is the 2017 MACRS depreciation deduction for a warehouse purchased on May 23, 2004? The building cost $50,000, not including land value. It was sold on Feb 4, 2017. a. 160 b. 227 c. 1,282 d...
What is 2017 regular MACRS depreciation for a computer costing 3,000? It was placed in service July 25, 2015. The mid quarter convention does not apply, neither section 179 or bonus depreciation do...
What is the 2017 MACRS depreciation deduction for a rental house placed in service on November 28, 2009. Property cost $100,000, which included $20,000 for the land. What is cost recovery for year...
Andre acquired a computer on March 3, 2019, for $17,400. He elects the straight-line method for cost recovery. Andre does not elect immediate expensing under 179. He does not claim any available ad...
The Modified Accelerated Cost Recovery System (MACRS) uses a recovery period method and a convention to depreciate tangible personal property. Why are a recovery period and a convention important i...
Golden Sales has bought $135,000 in fixed assets on January 1st associated with sales equipment. The residual value of these assets is estimated at $10,000 after they service their 4 year service l...
The price of a car depreciates over time at a rate of approximately 18% according to the formula (C)t = 36,500(0.82)^t . a. what was the initial cost of the car? b. what will the car be worth i...
A farmer buys a new tractor for $155,000 and assumes that it will have a trade-in value of $79,000 after 10 years. The farmer uses a constant rate of depreciation to determine the annual value of t...
Which NNOs must record depreciation on exhaustible assets? a) Hospitals. b) VHWOs. c) ONNOs. d) All of the above.
Bill?s Shirt Corp. paid $190,000 for machinery on July 1, 2014. The equipment has an estimated useful life of 5 years and a residual value of $10,000. A. Using the straight-line method: (1) Prepare...
Convers Corporation (calendar-year-end) acquired the following assets during the current tax year: (ignore 179 expense and bonus depreciation for this problem): b. What is the allowable MACRS depr...
Whispering Inc. purchased computer equipment on March 1, 2017, for $31,620. The computer equipment has a useful life of 10 years and a salvage value of $1,020. For tax purposes, the MACRS class lif...
The Bellcamp Soup Company uses the straight-line depreciation for financial reporting purposes and accelerated depreciation for tax purposes. The company's tax rate is 35%. The following informati...
Problem 1: Carl is curious about the original cost of the digital imaging equipment he uses at the First National Bank. Accounting cannot tell him the cost, but they know the annual depreciation o...
Nash Company uses special strapping equipment in its packaging business. The equipment was purchased in January 2016 for $11,400,000 and had an estimated useful life of 8 years with no salvage valu...
On January 1, 2014, Fishbone Corporation sold a building that cost $271,700 and that had accumulated depreciation of $104,200 on the date of sale. Fishbone received as consideration a $261,600 non-...
JBH, LP sold a commercial office building used in the business for $862,000. JBH purchased the building in 1991 for a cost of $700, 000 and had deducted $485,900 MACRS depreciation through date of...
Sunland Company had the following assets on January 1, 2017. During 2017, each of the assets was removed from service. The machinery was retired on January 1. The forklift was sold on June 30 for $...
Firm L purchased only one asset during its calendar taxable year. The asset cost $650,000 and has a three-year recovery period. Compute Firm L's MACRS depreciation with respect to this asset over t...
Bonny Manufacturing Company purchased a piece of equipment for $1,520,000 at the beginning of 2012. The equipment has an estimated useful life of four years and an estimated residual value of $150,...
Suppose the following situation exists for an economy: Kt+1/N = Kt/N. Given this information, we know with certainty that - investment per worker equals depreciation per worker in period t. - savi...
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