Question

Question 6 (1 point) Archie Co. purchased a framing machine for $45,000 on January 1, 2018. The machine is expected to have a four-year life, with a residual value of $5,000 at the end of four years. Using the straight-line method, depreciation for 2019 and book value at December 31. 2019, would be: $10,000 and $20,000. $10,000 and $25,000. $11,250 and $17.500. $11.250 and $22.500. Question 7 (1 point) In testing for recoverability of property, plant, and equipment, an impairment loss is required if the: Asset's book value exceeds the undiscounted sum of expected future cash flows. Undiscounted sum of its expected future cash flows exceeds the asset's book value. Present value of expected future cash flows exceeds its book value. All of these answer choices are incorrect. Question 8 (1 point) Murgatroyd Co, purchased equipment on January 1, 2016. for $500,000, estimating a four-year useful life and no residual value. In 2016 and 2017. Murgatroyd depreciated the asset using the sum-of-years-digits method. In 2018. Murgatroyd changed to straight-line depreciation for this equipment. What depreciation would Murgatroyd record for the year 2018 on this equipment? $75,000 $125,000 $150,000 None of these answer choices are correct.

Answer 1

Archie Co.

Depreciation = (Cost - Salvage Value ) / Life of Asset = ( 45000 - 5000 ) / 4 = 10000

Book Value 31.12.2019 = 45000 - 10000 - 10000 = 25000

Depreciation 2019 = 10000

Question 7

Asset's Book value exceeds the undiscounted sum of expected future cashflows.

Question 8

The depreciation for 2016 was: $500,000 x 4/10 = $200,000.

The depreciation for 2017 was: $500,000 x 3/10 = $150,000.

This leaves a book value of $150,000 (i.e., $500,000 - 350,000), so that the new depreciation

expense would be $75,000 (i.e., $150,000 / 2).