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AC 36100 Fall 2014 Assignment 5: Chapter 11 -Song Company purchased a depreciable asset for $350,000..

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Question;1;AC 36100 Fall 2014;Assignment 5: Chapter 11;Please present the answers on an excel spreadsheet clearly;stating the answer for;each question by the letter (a, b, c or d). Show work where;necessary to support;your answer. Do not submit answers in scanned pdf. Form.;1. Song Company purchased a depreciable asset for $350,000;on April 1, 2012.;The estimated salvage value is $35,000, and the estimated;useful life is 5 years.;The straight-line method is used for depreciation. What is;the balance in;accumulated depreciation on May 1, 2015 when the asset is;sold?;a. $126,000;b. $147,000;c. $173,250;d. $194,250;2. Morgan Corporation purchased a depreciable asset for;$400,000 on January 1;2012. The estimated salvage value is $40,000, and the;estimated useful life is 9;years. The straight-line method is used for depreciation. In;2015, Morgan;changed its estimates to a total useful life of 5 years with;a salvage value of;$60,000. What is 2015 depreciation expense?;a. $40,000;b. $60,000;c. $110,000;d. $120,000;3. Rock Company purchased a depreciable asset for $500,000;on April 1, 2012.;The estimated salvage value is $50,000, and the estimated;total useful life is 5;years. The straight-line method is used for depreciation.;What is the balance in;accumulated depreciation on May 1, 2015 when the asset is;sold?;a. $196,667;b. $210,000;c. $247,500;d. $277,500;4. Torque Co. has equipment with a carrying amount of;$1,600,000. The expected;future net cash flows from the equipment are $1,630,000, and;its fair value is;$1,360,000. The equipment is expected to be used in;operations in the future.;What amount (if any) should Torque report as an impairment;to its equipment?;a. No impairment should be reported.;b. $240,000;c. $30,000;d. $270,000;5. Regis Inc. bought a machine on January 1, 2004 for;$400,000. The machine had;an expected life of 20 years and was expected to have a;salvage value of;$40,000. On July 1, 2014, the company reviewed the potential;of the machine;and determined that its undiscounted future net cash flows;totaled $200,000 and;its discounted future net cash flows totaled $140,000. If no;active market exists;for the machine and the company does not plan to dispose of;it, what should;Regis record as an impairment loss on July 1, 2014?2;a. $ 0;b. $11,000;c. $20,000;d. $71,000;6. Barton Corporation acquires a coal mine at a cost of;$1,800,000. Intangible;development costs total $360,000. After extraction has;occurred, Barton must;restore the property (estimated fair value of the obligation;is $180,000), after;which it can be sold for $210,000. Barton estimates that;5,000 tons of coal can;be extracted. What is the amount of depletion per ton?;a. $426;b. $384;c. $468;d. $360;7. Barton Corporation acquires a coal mine at a cost of;$1,500,000. Intangible;development costs total $360,000. After extraction has;occurred, Barton must;restore the property (estimated fair value of the obligation;is $180,000), after;which it can be sold for $510,000. Barton estimates that;5,000 tons of coal can;be extracted. If 900 tons are extracted the first year;which of the following would;be included in the journal entry to record depletion?;a. Debit to Accumulated Depletion for $275,400;b. Debit to Inventory for $275,400;c. Credit to Inventory for $270,000;d. Credit to Accumulated Depletion for $459,000;8. Piazza Co. purchased a machine on July 1, 2014, for;$800,000. The machine;has an estimated useful life of five years and a salvage;value of $160,000. The;machine is being depreciated from the date of acquisition by;the 150% decliningbalance;method. For the year ended December 31, 2014, Piazza should;record;depreciation expense on this machine of;a. $240,000.;b. $160,000.;c. $120,000.;d. $96,000.;9. A machine with a five-year estimated useful life and an;estimated 10% salvage;value was acquired on January 1, 2013. The depreciation;expense for 2015;using the double-declining balance method would be original;cost multiplied by;a. 90% ? 40% ? 40%.;b. 60% ? 60% ? 40%.;c. 90% ? 60% ? 40%.;d. 40% ? 40%.;10. On April 1, 2013, Verlin Co. purchased new machinery for;$300,000. The;machinery has an estimated useful life of five years, and;depreciation is;computed by the sum-of-the-years'-digits method. The;accumulated depreciation;on this machinery at March 31, 2015, should be;a. $200,000.;b. $180,000.;c. $120,000.;d. $100,000.3;11. Harris Co. takes a full year's depreciation expense in;the year of an asset's;acquisition and no depreciation expense in the year of;disposition. Data relating;to one of Harris's depreciable assets at December 31, 2015;are as follows;Acquisition year 2013;Cost $210,000;Residual value 30,000;Accumulated depreciation 144,000;Estimated useful life 5 years;Using the same depreciation method as used in 2013, 2014;and 2015, how;much depreciation expense should Harris record in 2016 for;this asset?;a. $24,000;b. $36,000;c. $42,000;d. $48,000;12. A depreciable asset has an estimated 15% salvage value.;At the end of its;estimated useful life, the accumulated depreciation would;equal the original cost;of the asset under which of the following depreciation;methods?;Straight-line Productive Output;a. Yes No;b. Yes Yes;c. No Yes;d. No No;13. Net income is understated if, in the first year;estimated salvage value is;excluded from the depreciation computation when using the;Straight-line Production or;Method Use Method;a. Yes No;b. Yes Yes;c. No No;d. No Yes;14. Galt Company acquired a tract of land containing an;extractable natural;resource. Galt is required by the purchase contract to;restore the land to a;condition suitable for recreational use after it has;extracted the natural resource.;Geological surveys estimate that the recoverable reserves;will be 4,000,000 tons;and that the land will have a value of $600,000 after;restoration. Relevant cost;information follows;Land $6,400,000;Estimated restoration costs 1,200,000;If Galt maintains no inventories of extracted material, what;should be the charge;to depletion expense per ton of extracted material?;a. $1.60;b. $1.75;c. $2.00;d. $1.904;15. In January 2014, Fritz Mining Corporation purchased a;mineral mine for;$6,300,000 with removable ore estimated by geological;surveys at 2,500,000;tons. The property has an estimated value of $600,000 after;the ore has been;extracted. Fritz incurred $1,725,000 of development costs;preparing the property;for the extraction of ore. During 2014, 390,000 tons were;removed and 350,000;tons were sold. For the year ended December 31, 2014, Fritz;should include;what amount of depletion in its cost of goods sold?;a. $798,000;b. $889,200;c. $1,039,500;d. $1,158,000

 

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