10. A company decided to use the units-of-production method to calculate depreciation on a car to be driven by the sale manager. The amount of annual depreciation will vary with which of the following? A. Age of the car. B. Balance in accumulated depreciation. C. Number of kilometres the car is driven. D. Amount of maintenance expense incurred on the car.

10. A company decided to use the units-of-production method to calculate depreciation on a car to be driven by the sale manager. The amount of annual depreciation will vary with which of the following? A. Age of the car. B. Balance in accumulated depreciation. C. Number of kilometres the car is driven. D. Amount of maintenance expense incurred on the car.

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Description: 10. A company decided to use the units-of-production method to calculate depreciation on a car to be driven by the salemanager. The amount of annual depreciation will vary with which of the following?A. Age of the car.B. Balance in accumulated depre

Income Tax Fundamentals 2020

38th Edition

ISBN:9780357391129

Author:WHITTENBURG

Publisher:WHITTENBURG

Chapter8: Depreciation And Sale Of Business Property

Section: Chapter Questions

Problem 6MCQ: Which of the following is not true about the MACRS depreciation system: A salvage value must be...

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Calculate depreciation in the following case La Rosa del Monte has a moving truck that performs large removals in the Miami area and at the end of the year has a balance of $88,250 with a cumulative depreciation of $12,230. It also has a small truck that it uses in the Orlando area for $43,760 with a cumulative depreciation of $7,120. Determine what the depreciation is for each truck using the depreciation by units of activity method. Truck Cost Estimated residual value Estimated service lifetime Accumulated depreciation at the beginning of the year Miles used in the year Large truck $88,250 $17,000 230,000 millas $12,230 32,000 Small truck 43,760 6,500 280,000 millas 7,120 27,300
1. According to Chapter 10, what is the difference between an ordinary repair, an asset improvement, and an extraordinary repair? Please give an example of each and describe how each would be accounted for. 2. Please explain the Units-of-Output depreciation method and give an example of when it might be used. 3. Suppose that a machine had a units-of-production depreciation rate of $2 per operating hour and that the machine was used 20,000 hours the first year. Please calculate the depreciation for the first year and show what the journal entry would be. 4. Can we assume that the first year's depreciation expense (calculated in question 2 above) will also be the depreciation expense for subsequent years? Why or why not?
This question is based on the following information: Trinity Company bought a copying machine costing P 123,000 with an estimated life of 3 years with negligible salvage value. The estimated earnings after taxes of this machine at the end of each year are estimated below: Earnings after taxes End of year 1 P 8,120 2 7,200 3 6,820 The company is using the straight line method for computing the depreciation. What is the accounting rate of return on the average cost of investment? a. 10.5% b. 11.5% c. 12% d. 15%
Which of the following is not true about the MACRS depreciation system: A salvage value must be determined before depreciation percentages are applied to depreciable real estate. Residential rental buildings are depreciated over 27.5 years straight-line. Commercial real estate buildings are depreciated over 39 years straight-line. No matter when during the month depreciable real estate is purchased, it is considered to have been placed in service at mid-month for MACRS depreciation purposes.
Use the information in Problem A-1 to solve this problem. Assume the delivery van is expected to have a useful life of 100,000 miles (Year 1, 40,000 miles; Year 2, 30,000 miles; Year 3, 20,000 miles; Year 4, 10,000 miles). Required Prepare a schedule of depreciation using the units-of-production method. Check Figure Year 3 depreciation, 3,200 PROBLEM A-1 A delivery van was bought for 18,000. The estimated life of the van is four years. The trade-in value at the end of four years is estimated to be 2,000.
Given that a company is using the declining-balance method of depreciation for a machine that cost $2,500, and the machine is estimated to last 5 years, what would the depreciation expense be at the end of year 1? Group of answer choices $1,000 $1,600 $1,200 $1,300 What would the depreciation expense for the machine be on the second year? Group of answer choices $240 $1,600 $600 $1,000 What is the second year ending book value for the machine discussed in Group of answer choices $540 $900 $1,540 $1,000
Portland Co. uses the straight-line depreciation method for depreciable assets. All assets are depreciated individually except manufacturing machinery, which is depreciated by the composite method. Required: 1. What factors should have influenced Portland’s selection of the straight-line depreciation method? 2. a. What benefits should derive from using the composite method rather than the individual basis for manufacturing machinery? b. How should Portland have calculated the manufacturing machinery’s annual depreciation in its first year of operation?
2. Please explain the Units-of-Output depreciation method and give an example of when it might be used. 3. Suppose that a machine had a units-of-production depreciation rate of $2 per operating hour and that the machine was used 20,000 hours the first year. Please calculate the depreciation for the first year and show what the journal entry would be. 4. Can we assume that the first year's depreciation expense (calculated in question 2 above) will also be the depreciation expense for subsequent years? Why or why not?
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29. A car runs for 200,000 kilometers in 5 years. Which method of depreciation is used if the depreciation is calculated based on the kilometers driven? a. Sum of the Years-Digits method b. Units of production method c. Straight line depreciation d. Written down value method