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##### AC 36100 Fall 2014 Assignment 5: Chapter 11

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Question;Assignment 5: Chapter 11 Please present the answers on an excel spreadsheet clearly stating the answer foreach question by the letter (a, b, c or d). Show work where necessary to supportyour 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 inaccumulated depreciation on May 1, 2015 when the asset is sold?a. \$126,000b. \$147,000c. \$173,250d. \$194,2502.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 9years. The straight-line method is used for depreciation. In 2015, Morganchanged its estimates to a total useful life of 5 years with a salvage value of\$60,000. What is 2015 depreciation expense?a. \$40,000b. \$60,000c. \$110,000d. \$120,0003.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 5years. The straight-line method is used for depreciation. What is the balance inaccumulated depreciation on May 1, 2015 when the asset is sold?a. \$196,667b. \$210,000c. \$247,500d. \$277,5004.Torque Co. has equipment with a carrying amount of \$1,600,000. The expectedfuture 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. \$240,000c. \$30,000d. \$270,0005.Regis Inc. bought a machine on January 1, 2004 for \$400,000. The machine hadan 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 machineand determined that its undiscounted future net cash flows totaled \$200,000 andits discounted future net cash flows totaled \$140,000. If no active market existsfor the machine and the company does not plan to dispose of it, what shouldRegis record as an impairment loss on July 1, 2014?1a.b.c.d.\$0\$11,000\$20,000\$71,0006.Barton Corporation acquires a coal mine at a cost of \$1,800,000. Intangibledevelopment costs total \$360,000. After extraction has occurred, Barton mustrestore the property (estimated fair value of the obligation is \$180,000), afterwhich it can be sold for \$210,000. Barton estimates that 5,000 tons of coal canbe extracted. What is the amount of depletion per ton?a. \$426b. \$384c. \$468d. \$3607.Barton Corporation acquires a coal mine at a cost of \$1,500,000. Intangibledevelopment costs total \$360,000. After extraction has occurred, Barton mustrestore the property (estimated fair value of the obligation is \$180,000), afterwhich it can be sold for \$510,000. Barton estimates that 5,000 tons of coal canbe extracted. If 900 tons are extracted the first year, which of the following wouldbe included in the journal entry to record depletion?a. Debit to Accumulated Depletion for \$275,400b. Debit to Inventory for \$275,400c. Credit to Inventory for \$270,000d. Credit to Accumulated Depletion for \$459,0008.Piazza Co. purchased a machine on July 1, 2014, for \$800,000. The machinehas an estimated useful life of five years and a salvage value of \$160,000. Themachine is being depreciated from the date of acquisition by the 150% decliningbalance method. For the year ended December 31, 2014, Piazza should recorddepreciation expense on this machine ofa. \$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% salvagevalue was acquired on January 1, 2013. The depreciation expense for 2015using the double-declining balance method would be original cost multiplied bya. 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. Themachinery has an estimated useful life of five years, and depreciation iscomputed by the sum-of-the-years'-digits method. The accumulated depreciationon this machinery at March 31, 2015, should bea. \$200,000.b. \$180,000.c. \$120,000.d. \$100,000.211.Harris Co. takes a full year's depreciation expense in the year of an asset'sacquisition and no depreciation expense in the year of disposition. Data relatingto one of Harris's depreciable assets at December 31, 2015 are as follows:Acquisition yearCostResidual valueAccumulated depreciationEstimated useful life2013\$210,00030,000144,0005 yearsUsing the same depreciation method as used in 2013, 2014, and 2015, howmuch depreciation expense should Harris record in 2016 for this asset?a. \$24,000b. \$36,000c. \$42,000d. \$48,00012.A depreciable asset has an estimated 15% salvage value. At the end of itsestimated useful life, the accumulated depreciation would equal the original costof the asset under which of the following depreciation methods?a.b.c.d.13.Productive OutputNoYesYesNoNet income is understated if, in the first year, estimated salvage value isexcluded from the depreciation computation when using thea.b.c.d.14.Straight-lineYesYesNoNoStraight-lineMethodYesYesNoNoProduction orUse MethodNoYesNoYesGalt Company acquired a tract of land containing an extractable naturalresource. Galt is required by the purchase contract to restore the land to acondition 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 costinformation follows:LandEstimated restoration costs\$6,400,0001,200,000If Galt maintains no inventories of extracted material, what should be the chargeto depletion expense per ton of extracted material?a. \$1.60b. \$1.75c. \$2.00d. \$1.90315.In January 2014, Fritz Mining Corporation purchased a mineral mine for\$6,300,000 with removable ore estimated by geological surveys at 2,500,000tons. The property has an estimated value of \$600,000 after the ore has beenextracted. Fritz incurred \$1,725,000 of development costs preparing the propertyfor the extraction of ore. During 2014, 390,000 tons were removed and 350,000tons were sold. For the year ended December 31, 2014, Fritz should includewhat amount of depletion in its cost of goods sold?a. \$798,000b. \$889,200c. \$1,039,500d. \$1,158,000

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