21) Which of the following statements about the double-declining-balance (DDB) method is true?
A) Companies that use the DDB method do not use partial-year depreciation.
B) Companies that use the DDB method generally do not use scrap value to calculate current-year depreciation expense.
C) Using the DDB method, the amount of depreciation expense varies from year to year depending on usage of the asset.
D) All of the above statements are true.
22) The purchase of a building would involve a number of different components, such as the foundation and frame, heating and air conditioning systems, and other non-weight-bearing parts. Which of the following statements concerning the components-based approach for determining depreciation is true?
A) Both U.S. GAAP and IFRS require the components-based approach.
B) Both U.S. GAAP and IFRS allow the components-based approach but do not require it.
C) IFRS allows the components-based approach but does not require it; U.S. GAAP requires the components-based approach.
D) U.S. GAAP allows the components-based approach but does not require it; IFRS requires the components-based approach.
23) Kaven Corporation purchased a truck at the beginning of 2016 for $75,000 which will be depreciated using the units-of-output method. The truck is estimated to have a residual value of $3,000 and a useful life of 4 years and 120,000 miles. It was driven 18,000 miles in 2016 and 32,000 miles in 2017. What is the depreciation expense for 2017?
A) $18,750
B) $19,200
C) $20,000
D) $32,000
24) Lunar Products purchased a computer for $13,000 on July 1, 2016. The company intends to depreciate it over 4 years using the double-declining balance method. Residual value is $1,000. What is depreciation for 2017?
A) $3,000
B) $3,250
C) $4,500
D) $4,875
25) A production machine which cost $2,200,000 is acquired on October 1, 2016. Its estimated residual value is $200,000 and its expected life is 10 years or about 80,000 operating hours. During 2016, the machine was used to produce products for 3,000 operating hours during 2016 and 8,100 operating hours during 2017. Lorny does not use the half-year convention for depreciating any assets.
Calculate depreciation expense for 2015 and 2016 by each of the following methods:
(a)Straight-line method
(b)Double-declining balance method
(c) Units-of-output method
