1. On January 1, 2016, Halsted, Inc. purchased a new machine for $120,000. Its e
ID: 2566948 • Letter: 1
Question
1. On January 1, 2016, Halsted, Inc. purchased a new machine for $120,000. Its estimated useful life is eight years with an expected salvage value of $12,000.
Assuming double-declining balance depreciation, 2017 depreciation expense is:
Select one:
A. $30,000
B. $20,250
C. $22,500
D. $27,000
2. On January 1, 2016, Melvin Company purchased a bottle-capping machine for $160,000. During its useful life, the company expects that the machine will cap 1,500,000 bottles. The machine’s expected salvage value is $10,000. During 2016, the machine capped 250,000 bottles and during 2017, the machine capped 300,000 bottles.
Assuming units-of-production depreciation, 2017 depreciation expense is:
Select one:
A. $25,000
B. $26,666
C. $30,000
D. $32,000
3. On January 1, 2015, Burns Company purchased equipment for $172,000. Burns uses straight-line depreciation and estimates an eight-year useful life and a $12,000 salvage value. On December 31, 2019, Burns sells the equipment for $60,000.
In recording this sale, Burns should reflect:
Select one:
A. A $6,000 loss
B. A $24,000 loss
C. A $12,000 loss
D. No gain or loss
4. Unless another amortization method is shown to be more appropriate, intangible assets are amortized using the:
Select one:
A. Straight-line method
B. Percentage depletion method
C. Double declining-balance method
D. Units-of-production method
Explanation / Answer
1 Jan 1 2016 Machinery 120000 Salvage Value 12000 Depreciatable Value 108000 Life 8 Depreciation PA 13500 Rate 12.50% (13500/108000) Depreciation as per Double Declining Method for 2017 will be: Twice the rate as per Straight Line 25.00% Depreciable Value 108000 Double Depreciation Balance 27000 Answer is D 2 Jan 1 2016 Machinery 160000 Salvage Value 10000 Depreciatable Value 150000 Total Manuf Capacity 1500000 Depreciation PU of Productn 0.100 Units Produced in 2017 300000 Depreciation 30000 (.10*300000) Answer is C 3 Jan 1 2015 Machinery 172000 Salvage Value 12000 Depreciatable Value 160000 Life 8 Depreciation PA 20000 Year Opening Value Dep PA Closing value 2015 172000 20000 152000 2016 152000 20000 132000 2017 132000 20000 112000 2018 112000 20000 92000 2019 92000 20000 72000 On 31Dec 2019 Sold for 60000/- Book Value is 72000/- Loss of 12000/- is to be recorded Answer is C 4 Amortization basis the No of Years i.e. Straight Line Method is used in general cases if no specific method is available
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