On April 30, 2014, Tilton Products purchased machinery for $220,000. The useful

Question

On April 30, 2014, Tilton Products purchased machinery for $220,000. The useful life of this machinery is estimated at 8 years, with an $20,000 residual value.

46. Assume that in its financial statements, Tilton Products uses straight-line depreciation and the half-year convention. Depreciation expense recognized on this machinery in 2014 and 2015 will be: A. $18,750 in 2014 and $27,500 in 2015. B. $15,000 in 2014 and $30,000 in 2015. C. $12,500 in 2014 and $25,000 in 2015. D. $27,500 in 2014 and $13,750 in 2015.

47. Assume that in its financial statements, Tilton Products uses straight-line depreciation and rounds depreciation for fractional years to the nearest month. Depreciation expense recognized on this machinery in 2014 and 2015 will be:

A. $13,333 in 2014 and $25,000 in 2015. B. $10,000 in 2014 and $25,000 in 2015. C. $16,667 in 2014 and $25,000 in 2015. D. $25,000 in 2014 and $25,000 in 2015.

48. Assume that in its financial statements, Tilton Products uses the 200%-declining-balance method and the half-year convention. Depreciation expense in 2014 and 2015 will be:

A. $27,500 in 2014 and $48,125 in 2015. B. $55,000 in 2014 and $48,125 in 2015. C. $55,000 in 2014 and $41,250 in 2015. D. $27,500 in 2014 and $55,000 in 2015.

49. Assume that in its financial statements, Tilton Products uses the 150%-declining-balance method and the half-year convention. Depreciation expense in 2014 and 2015 will be:

A. $20,625 in 2014 and $37,383 in 2015. B. $41,250 in 2014 and $37,383 in 2015. C. $41,250 in 2014 and $41,250 in 2015. D. $37,500 in 2014 and $34,219 in 2015.

50. In the year 2020, Tilton Products sells this machinery for $12,000. At the date of sale, the machinery had been depreciated by Tilton Products to its estimated residual value of $20,000. This sale results in:

A. A $8,000 loss in both the company's financial statements and income tax return. B. No gain or loss in either the financial statements or income tax return. C. A $8,000 loss in the financial statements; a $8,000 gain in the income tax return. D. A $8,000 loss in the financial statements, but no gain or loss in the income tax return.

Explanation / Answer

Ans 46 Straight line Depreciation 220000-20000/8 25000 So with half year (6 month)convention the depreciation will be for 2014 $12,500 And full year depreciation is 2015 $25,000 Ans C 2014 $12500 and 2015 $25000 Ans 47 SLM and fractional year depreciation So for 2014 for 8 months 25000/12*8 16667 Ans full year for 2015 25000 Ans c 2014 $16667 and 2015 $25000 Ans 48 200% declining method and half year convention 200% declining method=220000*200%*100/8% 220000*200%*12.5%*1/2 year 27500 for 2015 (220000-27500)*200%*12.5% 48125 Ans a 2014 $27500 and for 2015 $48125 Ans 49 150% declining method and half year convention 150% declining method=220000*200%*100/8% 220000*150%*12.5%*1/2 year 20625 for 2015 (220000-20625)*150%*12.5% 37383 Ans A 2014 $20625 and 2015 $37383 Ans 50 A $8,000 loss in both the company's financial statements and income tax return

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