Depreciation Quiz

(LEVEL: Easy) On January 1, 2010 Lem Company bought machinery under a contract that required a down payment of $100,000, plus 24 monthly payments of $50,000 each, for total cash payments of $1,300,000. The cash equivalent price of the machinery was $1,100,000. The machinery has an estimated useful life of 10 years and estimated residual value of $50,000. Lem uses straight line depreciation. In its 2010 income statement, what amount should Lem report as depreciated for the machinery cost?

• 105,000

• 110,000

• 125,000

• 130,000

On January 1, 2006, Lane Company acquired equipment for $1,000,000 with an estimated 10-year useful life. Lane estimated a $100,000 residual values and used the straight line method of depreciation. During 2010, after its 2009 financial statements had been issued, Lane determined that, due to obsolescence, this equipment’s remaining useful life was only four more years and its residual value would be $40,000. In Lane’s December 31, 2010 statement of financial position, what is the carrying amount (also known as book value at the end) of the equipment ?

• 515,000

• 490,000

• 415,000

• 390,000

(LEVEL: Easy) Weir Company uses straight line depreciation for its property, plant and equipment, which stated at cost, in the table below . What amount was debited to accumulated depreciation during 2010 because of property, plant and equipments?

• 400,000

• 250,000

• 200,000

• 100,000

(LEVEL: Easy) Poe Company’s depreciation policy on machinery is as follows: A full year’s depreciation is taken in the year of an asset’s acquisition. No depreciation is taken in the 5 year of an asset’s disposition. The estimated useful life is 5 years. The straight line method is used. On June 30, 2010, Poe sold for $2,300,000 a machine acquired in 2007 for $4,200,000. The estimated residual value was $600, 000. How much gain on the disposal should Poe record in 2010?

• 140,000

• 260,000

• 620,000

• 980,000

(LEVEL: Easy) Lalaine Company acquired an aeroplane in 2007. At the time of acquisition, the cost of the jet frame was $46, 000,000 and the additional cost of the engine was $6,000,000. In 2010, the engine was replaced with a new one costing $12, 000,000. At the time of replacement, the accumulated depreciation to date on the jet frame was $17, 500,000 and on the engine was $4,000,000. What amount should be derecognized (also known as book value before replacement/disposal or sales) at the date of replacement?

• 4,000,000

• 2,000,000

• 6,000,000

• 0

(LEVEL: Easy) Marian Company purchased a noncurrent asset with a useful life of 10 years on January 1, 2010 for $6,500,000. On December 31, 2010, the amount the entity would receive from the disposal of the asset if it was already of the age and in the condition expected at the end of its useful life was estimated at $700,000. Inclusive of inflation, the actual amount expected to be received on disposal was estimated at $900,000. What should be the depreciation expense for the year ended December 31, 2010?

• 580,000

• 650,000

• 560,000

• 0

Apex Company purchased a tooling machine in 2000 for $3,000,000. The machine was depreciated on the straight line method over an estimated useful life of twenty years with no residual value. At the beginning of 2010, when the machine had been in use for 10 years, the entity paid $600,000 to overhaul the machine. As a result of this improvement, the entity estimated that the useful life of the machine would extend an additional 5 years. What should be the depreciation expense for the machine in 2010?

• 150,000

• 140,000

• 210,000

• 340,000

Carmet Company provided the following information with respect to its building. The building was acquired January 1, 2005 at a cost of P7, 800,000 with an estimated useful life of 40 years and residual value of P200, 000. Yearly depreciation was computed on the straight line method. The building was renovated on January 1, 2007 at a cost of P760, 000. This was considered as improvement. Residual value did not change. On January 1, 2010, the management decided to change the total life of the building to 30 years. What is the depreciation of the building for 2010?

• 292,400

• 266,000

• 334,400

• 294,000

Daisy Company acquired a drilling machine on October 1, 2008 at a cost of $2,500,000 and depreciated it at 25% per annum on a straight line basis. On October 1, 2010, the entity spent $500,000 on upgrade to the machine in order to improve its efficiency and increase the inflow of economic benefits over the machine’s remaining life. What depreciation expense should be recognized for the year ended September 30, 2011?

• 1,125,000

• 625,000

• 850,000

• 875,000

(Level: Easy) If residual value is assumed to be 10% of assessed cost, what is the useful life of the buildings?

• 20.00

• 22.22

• 5.00

• 6.45