Question :
71. On January 1, 2010, Wasson Company purchased a delivery vehicle : 1228544
71. On January 1, 2010, Wasson Company purchased a delivery vehicle costing $40,000. The vehicle has an estimated 6-year life and a $4,000 residual value. Wasson estimates that the vehicle will be driven 100,000 miles. What is the vehicle’s book value as of December 31, 2011 assuming Wasson uses the units-of-production depreciation method and the vehicle was driven 10,000 miles during 2010 and 18,000 miles during 2011?
A. $29,920
B. $28,800
C. $24,800
D. $25,920
72. Which of the following statements is false?
A. The book value at the end of an asset’s useful life will be the same under all the depreciation methods allowed under GAAP.
B. The balance in the accumulated depreciation account will be the same at the end of an asset’s useful life under all the methods allowed under GAAP.
C. Once you select a depreciation method, then you must use this method for all depreciable assets.
D. The annual depreciation expense and year-end book values will differ under the various depreciation methods over the life of the asset.
73. Under what conditions would a company most likely adopt the double-declining-balance method for financial reporting?
A. They have high technology, robotic equipment in their plant that becomes obsolete quickly and declines in utility to the company more rapidly in the early years of the assets’ lives.
B. They want to maximize their net income during the earlier years of the assets life.
C. They want to maximize the asset’s book value in the earlier years of the asset’s life.
D. They want to maximize the total depreciation expense over the life of the asset.
74. Which of the following statements is correct?
A. Companies can change the method of depreciating assets from one year to the next.
B. Companies can affect the book value at the end of an asset’s life by choosing one method of depreciation over another.
C. Companies can use one method of depreciation for some of their long-lived, productive assets but then use a different method for another group or type of long-lived, productive assets.
D. Companies can minimize an asset’s book value in the first year of use by selecting the straight-line depreciation method rather than the double-declining-balance method.
75. Which of the following statements is correct?
A. Using straight-line depreciation in comparison to an accelerated depreciation method will result in a lower reported amount of total assets at end of the first year of an asset’s life.
B. Using accelerated depreciation in the first year of an asset’s life will result in a higher net income during the first year compared to using the straight-line depreciation method.
C. Using an accelerated depreciation method will lead to a higher fixed asset turnover ratio for the first year.
D. Using straight-line depreciation in comparison to an accelerated depreciation method will lead to a higher book value at the end of an asset’s life.
76. Which of the following statements about the Modified Accelerated Cost Recovery System (MACRS) is correct?
A. It is similar to the units-of-production depreciation method.
B. It is applied using longer asset lives than the estimated useful lives required by GAAP.
C. It provides a short-term tax benefit because of the higher depreciation expense reported in the early years of an asset’s life.
D. It is acceptable for use when preparing financial statements.
77. Which of the following statements about asset impairment is false?
A. Asset impairment loss is the difference between an asset’s net book value and its estimated future cash flows.
B. If an asset is impaired, a loss would be recognized in the period it can be estimated.
C. Impairment will lead to writing down the asset’s net book value.
D. Asset impairment occurs when the estimated future cash flows are less than the asset’s net book value.
78. A company has some bottling equipment which cost $8.5 million, has a net book value of $4.1 million, estimated future cash flows of $3.7 million, and a fair value of $3.1 million. How much is the asset impairment loss?
A. $5.4 million
B. $4.1 million
C. $0.4 million
D. $1.0 million
79. A company has some bottling equipment which cost $8.5 million, has a net book value of $4.1 million, estimated future cash flows of $3.7 million, and a fair value of $3.1 million. Which of the following correctly describes the recording of the asset impairment loss?
A. The loss account is debited for $1.0 million and the asset account is credited for $1.0 million.
B. The loss account is debited for $0.4 million and the asset account is credited for $0.4 million.
C. The loss account is debited for $5.4 million and the asset account is credited for $5.4 million.
D. The loss account is debited for $4.8 million and the asset account is credited for $4.8 million.
80. On December 31, 2010, Hamilton Inc. sold a used industrial crane for $600,000 cash. The original cost of the crane was $5.0 million and its accumulated depreciation equaled $4.2 million on December 31, 2010. What is the gain or loss from the December 31, 2010 equipment sale?
A. $800,000 gain
B. $800,000 loss
C. $200,000 loss
D. $200,000 gain
