Week 3 Quiz 1

Wk 3 practice quiz #1 Accumulated depreciation will be the sum of two years of depreciation expense. Annual depreciation for this asset is ($400,000 - $10,000)/5 = $78,000. The sum of two years depreciation is $156,000 ($78,000 + $78,000). | | |
Micah Bartlett Company purchased equipment on January 1, 2010, at a total invoice cost of $400,000. The equipment has an estimated salvage value of $10,000 and an estimated useful life of 5 years. The amount of accumulated depreciation at December 31, 2011, if the straight-line method of depreciation is used, is:

| $160,000. |

| $78,000. |

| $80,000. |

| $156,000. |

The units-of-activity method takes salvage into consideration; therefore the depreciable cost is $10,000. This amount is divided by total estimated activity. The resulting number is multiplied by the units of activity used in 2010 and 2011 to compute the accumulated depreciation at the end of 2011, the second year of the asset's use. | | |
Ann Torbert purchased a truck for $11,000 on January 1, 2010. The truck will have an estimated salvage value of $1,000 at the end of 5 years. Using the units-of-activity method, the balance in accumulated depreciation at December 31, 2011, can be computed by the following formula:

| ($11,000 / Total estimated activity) X Units of activity for 2010 and 2011. |

| ($11,000 / Total estimated activity) X Units of activity for 2011). |

| ($10,000 / Total estimated activity) X Units of activity for 2010 and 2011. |

| ($10,000 / Total estimated activity) X Units of activity for 2011). |

For the double-declining-balance method, the depreciation rate would be 25% or (1/N X 2), with n = 8 years. For 2011, annual depreciation expense is $15,000 = $60,000 (book value) X .25; for 2012, annual depreciation expense is $11,250 = [($60,000 - $15,000) X .25]. | | |
Jefferson Company purchased a piece of equipment on January 1, 2011. The equipment cost $60,000 and had an