Depreciation applies to three classes of plant assets: land, buildings, and equipment.

The revenue-producing ability of a depreciable asset will decline due to wear and tear and to obsolescence.

Recognizing depreciation on an asset results in an accumulation of cash for replacement of the asset.

The balance in accumulated depreciation represents the total cost that has been charged to expense.

Depreciation expense and accumulated depreciation are reported on the income statement

Four factors affect the computation of depreciation: cost, useful life, salvage value, and residual value.

Additions to plant assets are:

Depreciation is a process of:

Micah Bartlett Company purchased equipment on

January 1, 2016, 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, 2017, if the

straight-line method of depreciation is used, is:

Ann Torbert purchased a truck for $11,000 on January

1, 2016. 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, 2017, can be computed

by the following formula:

Jefferson Company purchased a piece of equipment

on January 1, 2017. The equipment cost $60,000 and

has an estimated life of 8 years and a salvage value of

$8,000. What was the depreciation expense for the

asset for 2018 under the double-declining-balance

method?

Able Towing Company purchased a tow truck for

$60,000 on January 1, 2015. It was originally depreciated on a straight-line basis over 10 years with an

assumed salvage value of $12,000. On December 31,

2017, before adjusting entries had been made, the

company decided to change the remaining estimated

life to 4 years (including 2017) and the salvage value

to $2,000. What was the depreciation expense for

2017?

Bennie Razor Company has decided to sell one of its

old manufacturing machines on June 30, 2017. The

machine was purchased for $80,000 on January 1,

2013, and was depreciated on a straight-line basis for

10 years assuming no salvage value. If the machine

was sold for $26,000, what was the amount of the

gain or loss recorded at the time of the sale?

Maggie Sharrer Company expects to extract 20 million tons of coal from a mine that cost $12 million. If

no salvage value is expected and 2 million tons are

mined in the first year, the entry to record depletion

will include a:

Which of the following statements is false?

Martha Beyerlein Company incurred $150,000 of

research and development costs in its laboratory to

develop a patent granted on January 2, 2017. On July

31, 2017, Beyerlein paid $35,000 for legal fees in a

successful defense of the patent. The total amount

debited to Patents through July 31, 2017, should be:

Indicate which of the following statements is true

Lake Coffee Company reported net sales of $180,000,

net income of $54,000, beginning total assets of

$200,000, and ending total assets of $300,000. What

was the company’s asset turnover?

Which of the following depreciation methods always allocates a higher amount of depreciation in earlier years than in later years?

The expected value of an asset at the end of its useful life is known as ________.

On January 1, 2018, Nakroth Manufacturing Company purchased a machine for $40,400,000. Nakroth's management expects to use the machine for 34,000 hours over the next six years. The estimated residual value of the machine at the end of the sixth year is $50,000. The machine was used for 4600 hours in 2018 and 6000 hours in 2019. Calculate the book value of the machine at the end of 2019 if the company uses the units-of-production method of depreciation. (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)

An asset is considered to be obsolete ________.

A company's accountant capitalized a payment that should have been recorded as a revenue expenditure. How will this error affect the company's financial statements?

On January 1, 2018, TS MPT Company acquired a machine for $1,070,000. The estimated useful life of the asset is five years. Residual value at the end of five years is estimated to be $87,000. What is the book value of the machine at the end of 2019 if the company uses the straight-line method of depreciation?

Lorion Company purchased a van on January 1, 2019, for $930,000. Estimated life of the van was five years, and its estimated residual value was $95,000. Lorion uses the straight-line method of depreciation. Calculate the book value of the van at the end of 2019.

A fully depreciated plant asset ________.

Which of the following is a characteristic of a plant asset, such as a building?

Veres Company purchased a used machine for $12,000. The machine required installation costs of $3000 and insurance while in transit of $1500. At which of the following amounts would the machine be recorded?

An asset was purchased for $33,000 on January 1, 2019. The asset's estimated useful life was five years, and its residual value was $4000. The straight-line method of depreciation was used. Calculate the gain or loss if the asset is sold for $26,000 on December 31, 2019, the last day of the accounting period.

Which of the following depreciation methods allocate a varying amount of depreciation to expense each year based on an asset's usage?

Which of the following requires businesses to record depreciation?

Elandor Enterprises discarded a computer that was fully depreciated and had no residual value. As a result of this transaction, Elandor will ________.

Annette Sales sold its old office furniture for $6000. The original cost was $16,000, and at the time of sale, accumulated depreciation was $14,000. What is the effect of this transaction?

Which of the following is included in the cost of a plant asset?

The cost of an asset is $1,090,000, and its residual value is $300,000. Estimated useful life of the asset is eight years. Calculate depreciation for the first year using the double-declining-balance method of depreciation. (Do not round any intermediate calculations, and round your final answer to the nearest dollar.)

The gain or loss on the sale of a plant asset is determined by comparing the market value of assets received with the ________ of asset sold.

Which of the following statements is incorrect?