Pre-Assessment: Intermediate Accounting II Units 4-6 (KWV1) updated And approved question and answers

Equipment is placed in service on January 1. The cost of the equipment is $250,000 with a salvage value of $25,000 and an estimated useful life of five years. Which amount of annual depreciation expense should be recorded on December 31 of Year 2 under the sumofyears'digits method? $60,000 A company placed an asset into service on Day 1 of Year 1 with the following data related to the purchase: Cost of machinery $225,000 Estimated salvage value $75,000 Product life hours 75,000 hours Useful life 5 years Hours used in Year 1 5,000 hours Which amount of annual depreciation expense should be recorded in the first year using the activity method? $10,000 $225,000$75,000=$150,000 ($150,000*5,000 hours)/75,000 On July 1, a company placed into service a vehicle for $50,000 with an estimated useful life of five years and no salvage value. The company prepares accrualbasis financial statements on a calendaryear basis. How many months should be included in the calculation of depreciation expense for the year of acquisition using the doubledecliningbalance method? 6 A company purchased a piece of equipment for $120,000 and estimated that the asset will have no salvage value at the end of its 15year useful life. At the end of Year 5 of ownership, when accumulated depreciation was $40,000 and the asset's book value was $80,000, the company revised the asset's estimated useful life to a total of 10 years. What is the appropriate accounting treatment beginning with Year 6? The equipment will depreciate $80,000 over the next five years. A company using the composite approach to depreciation sells equipment for $10,000. The equipment was purchased five years earlier for $15,000, and the company has already recorded $5,000 in accumulated depreciation. What is included in the journal entry for the sale of the equipment? Debit accumulated depreciationequipment for $5,000 A steel manufacturer uses the production variable method for depreciating assets. Which combination best describes the depreciation method used? Straightline and activity A company owns an asset with an original cost of $300,000 and a current book value of $160,000. During a review of the asset for impairment, the company estimates the expected future cash flows from the use and disposal of the asset to be $200,000. There is an active market for this asset, and the fair value of the asset, calculated as the present value of expected future cash flows, is $140,000. Should this asset be considered impaired? No, because the estimate of expected future cash flows (undiscounted) is greater than the book value. Several years ago, a company acquired an asset at a cost of $400,000. Last year, the company recognized an impairment loss of $25,000 and properly reduced the asset's book value from $250,000 to $225,000. Using the asset's new base of $225,000, the company calculates depreciation for the current year to be $10,000, bringing the book value down to $215,000. However, the company has also determined that the asset's fair value has recovered and is now estimated to be $260,000. How should the company measure the asset on its current balance sheet The company should not reverse the impairment and should depreciate the asset by $10,000 to a new book value of $215,000. A company invests $15,000,000 into a coal mine estimated to have 20 million tons of coal. The coal mine is estimated to be in operation for the next five years. In Year 1, the company extracted and sold 1 million tons of coal. How much is depletion in Year 1? $750,000 $15,000,000/20,000,000= $.75 $.75*1,000,000=$750,000 A company invested $15,000,000 in a coal mine estimated to have 1,500,000 tons of coal. In the first year, the company extracted 100,000 tons of coal. At the end of the first year, it became clear that the coal mine was likely to have only another 700,000 tons of coal remaining. Which depletion rate will be used starting in the second year? $20.00 per ton $15,000,000/700,000 A company reported total assets of $10,000,000 as of December 31, 2018, and $14,000,000 as of December 31, 2019. Net sales revenue was $6,000,000 for the year ending December 31, 2018, and $8,000,000 for the year ending December 31, 2019. What was