Depreciation and Amortization - CPA Financial Accounting and Reporting (FAR)
Card 1 of 24
A company buys 200 doors for $75 each at the beginning of Year 1. On the same day, the company buys an other 300 doors for $85 each. None of the doors are expected to have any salvage value. The cheaper doors have a useful life of 7 years and the more expensive doors have a useful life of 9 years. In Year 2, the company sells one of the cheaper doors for $90 and one of the more expensive doors for $120. All doors were put into a single group for depreciation purposes. How much gain will the company recognize on the sale of the doors in Year 2?
A company buys 200 doors for $75 each at the beginning of Year 1. On the same day, the company buys an other 300 doors for $85 each. None of the doors are expected to have any salvage value. The cheaper doors have a useful life of 7 years and the more expensive doors have a useful life of 9 years. In Year 2, the company sells one of the cheaper doors for $90 and one of the more expensive doors for $120. All doors were put into a single group for depreciation purposes. How much gain will the company recognize on the sale of the doors in Year 2?
Tap to reveal answer
The doors will use the group/composite method of depreciation. Therefore, no gain or loss will be recognized until all items in the group have been sold.
The doors will use the group/composite method of depreciation. Therefore, no gain or loss will be recognized until all items in the group have been sold.
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The Great Dane Bus company buys a new bus on February 14, Year 1. The bus costs $100,000 and has a salvage value of $8,000. The company expects the bus to be used for 200,000 miles and will depreciate it using the units of production method. The bus is driven 35,000 miles during Year 1 and another 40,000 miles during Year 2. What is the book value of the bus at the end of Year 2?
The Great Dane Bus company buys a new bus on February 14, Year 1. The bus costs $100,000 and has a salvage value of $8,000. The company expects the bus to be used for 200,000 miles and will depreciate it using the units of production method. The bus is driven 35,000 miles during Year 1 and another 40,000 miles during Year 2. What is the book value of the bus at the end of Year 2?
Tap to reveal answer
Since the bus is being depreciated using the units-of-production method, $.46 in depreciation will be recorded for every mile driven ($100K cost - $8K salvage value divided by 200K estimated miles). At the end of Year 2, 75K miles have been driven, for a total of $34,500 in depreciation (75K miles x $.46 per mile). Therefore, the book value of the bus is $65,500 ($100K - $34,500).
Since the bus is being depreciated using the units-of-production method, $.46 in depreciation will be recorded for every mile driven ($100K cost - $8K salvage value divided by 200K estimated miles). At the end of Year 2, 75K miles have been driven, for a total of $34,500 in depreciation (75K miles x $.46 per mile). Therefore, the book value of the bus is $65,500 ($100K - $34,500).
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A mining company uses the depletion method to allocate the cost of removing natural resources from its mine. Which of the following statements is correct?
A mining company uses the depletion method to allocate the cost of removing natural resources from its mine. Which of the following statements is correct?
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The depletion base will be equal to the cost to purchase the mine minus the mine's estimated residual value.
The depletion base will be equal to the cost to purchase the mine minus the mine's estimated residual value.
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Of the following assets, which would be typically reported on a balance sheet as an intangible?
Of the following assets, which would be typically reported on a balance sheet as an intangible?
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Patents are intangible assets and their fees are capitalized.
Patents are intangible assets and their fees are capitalized.
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A firm should recognize goodwill on the balance sheet at which of the following points?
A firm should recognize goodwill on the balance sheet at which of the following points?
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Goodwill is recognized in the balance sheet when it has been created from a business acquisition.
Goodwill is recognized in the balance sheet when it has been created from a business acquisition.
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Of the following, which cost would be included in a "land" account?
Of the following, which cost would be included in a "land" account?
Tap to reveal answer
Clearing trees would be a part of getting the land ready for its intended use, where as a facility on the land is its own asset, engineer fees are separate, and loan interest has its own recognition rules.
Clearing trees would be a part of getting the land ready for its intended use, where as a facility on the land is its own asset, engineer fees are separate, and loan interest has its own recognition rules.
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A company buys 200 doors for $75 each at the beginning of Year 1. On the same day, the company buys an other 300 doors for $85 each. None of the doors are expected to have any salvage value. The cheaper doors have a useful life of 7 years and the more expensive doors have a useful life of 9 years. In Year 2, the company sells one of the cheaper doors for $90 and one of the more expensive doors for $120. All doors were put into a single group for depreciation purposes. How much gain will the company recognize on the sale of the doors in Year 2?
A company buys 200 doors for $75 each at the beginning of Year 1. On the same day, the company buys an other 300 doors for $85 each. None of the doors are expected to have any salvage value. The cheaper doors have a useful life of 7 years and the more expensive doors have a useful life of 9 years. In Year 2, the company sells one of the cheaper doors for $90 and one of the more expensive doors for $120. All doors were put into a single group for depreciation purposes. How much gain will the company recognize on the sale of the doors in Year 2?
Tap to reveal answer
The doors will use the group/composite method of depreciation. Therefore, no gain or loss will be recognized until all items in the group have been sold.
The doors will use the group/composite method of depreciation. Therefore, no gain or loss will be recognized until all items in the group have been sold.
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The Great Dane Bus company buys a new bus on February 14, Year 1. The bus costs $100,000 and has a salvage value of $8,000. The company expects the bus to be used for 200,000 miles and will depreciate it using the units of production method. The bus is driven 35,000 miles during Year 1 and another 40,000 miles during Year 2. What is the book value of the bus at the end of Year 2?
The Great Dane Bus company buys a new bus on February 14, Year 1. The bus costs $100,000 and has a salvage value of $8,000. The company expects the bus to be used for 200,000 miles and will depreciate it using the units of production method. The bus is driven 35,000 miles during Year 1 and another 40,000 miles during Year 2. What is the book value of the bus at the end of Year 2?
Tap to reveal answer
Since the bus is being depreciated using the units-of-production method, $.46 in depreciation will be recorded for every mile driven ($100K cost - $8K salvage value divided by 200K estimated miles). At the end of Year 2, 75K miles have been driven, for a total of $34,500 in depreciation (75K miles x $.46 per mile). Therefore, the book value of the bus is $65,500 ($100K - $34,500).
Since the bus is being depreciated using the units-of-production method, $.46 in depreciation will be recorded for every mile driven ($100K cost - $8K salvage value divided by 200K estimated miles). At the end of Year 2, 75K miles have been driven, for a total of $34,500 in depreciation (75K miles x $.46 per mile). Therefore, the book value of the bus is $65,500 ($100K - $34,500).
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A mining company uses the depletion method to allocate the cost of removing natural resources from its mine. Which of the following statements is correct?
A mining company uses the depletion method to allocate the cost of removing natural resources from its mine. Which of the following statements is correct?
Tap to reveal answer
The depletion base will be equal to the cost to purchase the mine minus the mine's estimated residual value.
The depletion base will be equal to the cost to purchase the mine minus the mine's estimated residual value.
← Didn't Know|Knew It →
Of the following assets, which would be typically reported on a balance sheet as an intangible?
Of the following assets, which would be typically reported on a balance sheet as an intangible?
Tap to reveal answer
Patents are intangible assets and their fees are capitalized.
Patents are intangible assets and their fees are capitalized.
← Didn't Know|Knew It →
A firm should recognize goodwill on the balance sheet at which of the following points?
A firm should recognize goodwill on the balance sheet at which of the following points?
Tap to reveal answer
Goodwill is recognized in the balance sheet when it has been created from a business acquisition.
Goodwill is recognized in the balance sheet when it has been created from a business acquisition.
← Didn't Know|Knew It →
Of the following, which cost would be included in a "land" account?
Of the following, which cost would be included in a "land" account?
Tap to reveal answer
Clearing trees would be a part of getting the land ready for its intended use, where as a facility on the land is its own asset, engineer fees are separate, and loan interest has its own recognition rules.
Clearing trees would be a part of getting the land ready for its intended use, where as a facility on the land is its own asset, engineer fees are separate, and loan interest has its own recognition rules.
← Didn't Know|Knew It →
A company buys 200 doors for $75 each at the beginning of Year 1. On the same day, the company buys an other 300 doors for $85 each. None of the doors are expected to have any salvage value. The cheaper doors have a useful life of 7 years and the more expensive doors have a useful life of 9 years. In Year 2, the company sells one of the cheaper doors for $90 and one of the more expensive doors for $120. All doors were put into a single group for depreciation purposes. How much gain will the company recognize on the sale of the doors in Year 2?
A company buys 200 doors for $75 each at the beginning of Year 1. On the same day, the company buys an other 300 doors for $85 each. None of the doors are expected to have any salvage value. The cheaper doors have a useful life of 7 years and the more expensive doors have a useful life of 9 years. In Year 2, the company sells one of the cheaper doors for $90 and one of the more expensive doors for $120. All doors were put into a single group for depreciation purposes. How much gain will the company recognize on the sale of the doors in Year 2?
Tap to reveal answer
The doors will use the group/composite method of depreciation. Therefore, no gain or loss will be recognized until all items in the group have been sold.
The doors will use the group/composite method of depreciation. Therefore, no gain or loss will be recognized until all items in the group have been sold.
← Didn't Know|Knew It →
The Great Dane Bus company buys a new bus on February 14, Year 1. The bus costs $100,000 and has a salvage value of $8,000. The company expects the bus to be used for 200,000 miles and will depreciate it using the units of production method. The bus is driven 35,000 miles during Year 1 and another 40,000 miles during Year 2. What is the book value of the bus at the end of Year 2?
The Great Dane Bus company buys a new bus on February 14, Year 1. The bus costs $100,000 and has a salvage value of $8,000. The company expects the bus to be used for 200,000 miles and will depreciate it using the units of production method. The bus is driven 35,000 miles during Year 1 and another 40,000 miles during Year 2. What is the book value of the bus at the end of Year 2?
Tap to reveal answer
Since the bus is being depreciated using the units-of-production method, $.46 in depreciation will be recorded for every mile driven ($100K cost - $8K salvage value divided by 200K estimated miles). At the end of Year 2, 75K miles have been driven, for a total of $34,500 in depreciation (75K miles x $.46 per mile). Therefore, the book value of the bus is $65,500 ($100K - $34,500).
Since the bus is being depreciated using the units-of-production method, $.46 in depreciation will be recorded for every mile driven ($100K cost - $8K salvage value divided by 200K estimated miles). At the end of Year 2, 75K miles have been driven, for a total of $34,500 in depreciation (75K miles x $.46 per mile). Therefore, the book value of the bus is $65,500 ($100K - $34,500).
← Didn't Know|Knew It →
A mining company uses the depletion method to allocate the cost of removing natural resources from its mine. Which of the following statements is correct?
A mining company uses the depletion method to allocate the cost of removing natural resources from its mine. Which of the following statements is correct?
Tap to reveal answer
The depletion base will be equal to the cost to purchase the mine minus the mine's estimated residual value.
The depletion base will be equal to the cost to purchase the mine minus the mine's estimated residual value.
← Didn't Know|Knew It →
Of the following assets, which would be typically reported on a balance sheet as an intangible?
Of the following assets, which would be typically reported on a balance sheet as an intangible?
Tap to reveal answer
Patents are intangible assets and their fees are capitalized.
Patents are intangible assets and their fees are capitalized.
← Didn't Know|Knew It →
A firm should recognize goodwill on the balance sheet at which of the following points?
A firm should recognize goodwill on the balance sheet at which of the following points?
Tap to reveal answer
Goodwill is recognized in the balance sheet when it has been created from a business acquisition.
Goodwill is recognized in the balance sheet when it has been created from a business acquisition.
← Didn't Know|Knew It →
Of the following, which cost would be included in a "land" account?
Of the following, which cost would be included in a "land" account?
Tap to reveal answer
Clearing trees would be a part of getting the land ready for its intended use, where as a facility on the land is its own asset, engineer fees are separate, and loan interest has its own recognition rules.
Clearing trees would be a part of getting the land ready for its intended use, where as a facility on the land is its own asset, engineer fees are separate, and loan interest has its own recognition rules.
← Didn't Know|Knew It →
A company buys 200 doors for $75 each at the beginning of Year 1. On the same day, the company buys an other 300 doors for $85 each. None of the doors are expected to have any salvage value. The cheaper doors have a useful life of 7 years and the more expensive doors have a useful life of 9 years. In Year 2, the company sells one of the cheaper doors for $90 and one of the more expensive doors for $120. All doors were put into a single group for depreciation purposes. How much gain will the company recognize on the sale of the doors in Year 2?
A company buys 200 doors for $75 each at the beginning of Year 1. On the same day, the company buys an other 300 doors for $85 each. None of the doors are expected to have any salvage value. The cheaper doors have a useful life of 7 years and the more expensive doors have a useful life of 9 years. In Year 2, the company sells one of the cheaper doors for $90 and one of the more expensive doors for $120. All doors were put into a single group for depreciation purposes. How much gain will the company recognize on the sale of the doors in Year 2?
Tap to reveal answer
The doors will use the group/composite method of depreciation. Therefore, no gain or loss will be recognized until all items in the group have been sold.
The doors will use the group/composite method of depreciation. Therefore, no gain or loss will be recognized until all items in the group have been sold.
← Didn't Know|Knew It →
The Great Dane Bus company buys a new bus on February 14, Year 1. The bus costs $100,000 and has a salvage value of $8,000. The company expects the bus to be used for 200,000 miles and will depreciate it using the units of production method. The bus is driven 35,000 miles during Year 1 and another 40,000 miles during Year 2. What is the book value of the bus at the end of Year 2?
The Great Dane Bus company buys a new bus on February 14, Year 1. The bus costs $100,000 and has a salvage value of $8,000. The company expects the bus to be used for 200,000 miles and will depreciate it using the units of production method. The bus is driven 35,000 miles during Year 1 and another 40,000 miles during Year 2. What is the book value of the bus at the end of Year 2?
Tap to reveal answer
Since the bus is being depreciated using the units-of-production method, $.46 in depreciation will be recorded for every mile driven ($100K cost - $8K salvage value divided by 200K estimated miles). At the end of Year 2, 75K miles have been driven, for a total of $34,500 in depreciation (75K miles x $.46 per mile). Therefore, the book value of the bus is $65,500 ($100K - $34,500).
Since the bus is being depreciated using the units-of-production method, $.46 in depreciation will be recorded for every mile driven ($100K cost - $8K salvage value divided by 200K estimated miles). At the end of Year 2, 75K miles have been driven, for a total of $34,500 in depreciation (75K miles x $.46 per mile). Therefore, the book value of the bus is $65,500 ($100K - $34,500).
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