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Exam 11: Depreciation, Impairment, and Disposition

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Question 31

Multiple Choice

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In January, 2010, Korro Corporation purchased a mineral mine for $5.1 million with removable ore estimated by geological surveys at 2 million tons.The property has an estimated value of $300,000 after the ore has been extracted.The company incurred $1.5 million of development costs preparing the mine for production.During 2010, 500,000 tons were removed and 400,000 tons were sold.What is the amount of depletion that Pratt should expense for 2010?

A) $960,000
B) $1,200,000
C) $1,260,000
D) $1,680,000

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Question 32

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If an industrial firm uses the units-of-production method for calculating depreciation on its only plant asset, factory machinery, the credit to accumulated depreciation from period to period during the life of the firm will

A) be constant.
B) vary with unit sales.
C) vary with sales revenue.
D) vary with production.

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Question 33

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The following is true of depreciation accounting.

On January 3, 2010, Pankor Co.purchased machinery.The machinery has an estimated useful life of nine years and an estimated residual value of $45,000.The depreciation applicable to this machinery was $77,000 for 2012, calculated by the straight-line method.The acquisition cost of the machinery was

Hopper Company acquired machinery on January 1, 2005 which it amortized under the straight-line method with an estimated life of fifteen years and no residual value.On January 1, 2010, Hopper estimated that the remaining life of this machinery was six years with no residual value.How should this change be accounted for by Hopper?

A general description of the depreciation methods applicable to major classes of depreciable assets

Marlowe Corporation purchased factory equipment that was installed and put into service January 2, 2010, at a total cost of $110,000.Residual value was estimated at $6,000.The equipment is being amortized over four years using the double declining-balance method.For the year 2011, Marsh should record depreciation expense on this equipment of

On January 1, 2010, Olds Company purchased a machine costing $250,000.The machine is an asset class for tax purposes with a CCA rate of 30%.It has an estimated $40,000 residual value at the end of its economic life.Assuming the company uses the capital cost allowance method, the amount of CCA deduction for tax purposes for the year 2010 is

A major objective of capital cost allowance for tax depreciation is to

The sale of a depreciable asset resulting in a loss indicates that the proceeds from the sale were

Use of the double declining-balance method

Dividends representing a return of capital to shareholders are not uncommon among companies which

Private entity GAAP requires that assets must be assessed for indications of impairment

Consider an asset that is classified as held for sale for which the following information is available: If the asset was sold on April 1, 2011 for $27,600, there would be

Moldowa Co.purchased machinery that was installed and ready for use on January 3, 2010, at a total cost of $115,000.Residual value was estimated at $15,000.The machinery will be amortized over five years using the double declining-balance method. For the year 2011, Vincent should record depreciation expense on this machinery of

Consider an asset that was separated into its main components (A, B and C) .The $1,200,000 purchase price was allocated to these components in equal proportions.The useful lifes are 12, 4, and 7 years for components A, B and C respectively.Neither of the Components (except for component C for which a $18,000 value is anticipated) is Expected to have a residual value.Assuming straight-line depreciation, total annual depreciation expense relating to these assets is

The activity method of depreciation

During 2010, Sayer Co.sold equipment that had cost $206,000 for $127,600.This resulted in a gain of $9,600.The balance in Accumulated depreciation-Equipment was $660,000 on January 1, 2010, and $630,000 on December 31.No other equipment was Disposed of during 2010.Depreciation expense for 2010 was

Magenta Company, a public corporation owns equipment for which the following year-end information is available: Which of the following best describes the proper accounting treatment for Magenta's equipment?

In 2010 Banko Corporation's financial statements included the following information: Banko's return on assets (ROA) for 2010 was