Question

15. When computing tax depreciation in the first year for new equipment the has a recovery period of less than 20 years, you ... a must take 100% bonus depreciation unless you elect not to de b. cannot take 100% bonus depreciation unless you elect to do c. can or cannot take 100% bonus depreciation as you wish; no election is required. d. must take 100% bonus depreciation unless you elect not to do sa but must wait to take normal Table 1 depreciation until Year 2. 16. Under GAAP, annual depreciation for a building can be allocated... a. entirely to Depreciation Expense, entirely to Inventory- Work-In-Process OH or partly to both, depending on how the building is used. b. only to Depreciation Expense. c. only to Inventory_Work-In-Process OH. d. entirely to either Depreciation Expense or Inventory- Work-In-Process OH, but not allocated partly to both. 17. To depreciate an asset under the double-declining balance method, multiply... a. the depreciable base by each year's depreciation rate. b. the depreciation rate by each year's beginning book value. c. the acquisition cost by each year's depreciation rate. d. the cost basis by each year's depreciation rate. 18. Under straight-line depreciation, the annual depreciation rate is computed by... a. dividing 100% by the estimated life. b. dividing the numeral 1.00 by the estimated life. c. either a or b. d. none of the above. 19. Under sum-of-the-years-digits depreciation... a. the book value remains the same each year. b. the depreciation rate changes each year. c. the denominator of the SYD fraction changes each year. d. all of the above.

Answer 1

Solution

Q15. When computing tax depreciation in the first year for new equipment that has a recovery period of less than 20 years, you…

Correct option –

Must take 100% bonus depreciation unless you elect not to do so.

Q16. Under GAAP annual depreciation for a building can be allocated:

Correct option –

Only to inventory – work in process OH

Q17. To depreciation an asset under double declining balance method, multiply…

Correct option –

The depreciation rate by each year’s beginning book value.

The depreciation rate for double declining balance method is computed as follows,

Depreciation rate = 1/useful life of asset x 200%

Q18. Under straight line depreciation, the annual depreciation rate is computed by…

Correct option –

By dividing the numeral 1.00 by the estimated life

Q19. Under the sum-of-the-years’ digits depreciation…

Correct option –

The depreciation rate changes each year.

For instance, depreciation rate for first year for an asset with useful life of 5 years would as follows,

Depreciation rate = remaining useful life of asset x depreciation fraction

Depreciation rate for first year = 5 x 1/15 = 5/15 = 33%

For second year = 4 x 1/15 = 4/15 = 26.67%