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1. McDonald Company acquired machinery on January 1, 2020 which it depreciated under the straight-line method with an estimated life of fifteen years and no

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1. McDonald Company acquired machinery on January 1, 2020 which it depreciated under the straight-line method with an estimated life of fifteen years and no salvage value. On January 1, 2025, McDonald estimated that the remaining life of this machinery was six years with no salvage value. How should this change be accounted for by McDonald? a. As a prior period adjustment b. As the cumulative effect of a change in accounting principle in 2025 c. By setting future annual depreciation equal to one-sixth of the book value on January 1, 2025 d. By continuing to depreciate the machinery over the original fifteen-year life 2. The recoverability test compares a. the cost of the asset to its carrying value. b. the carrying value of the asset to its undiscounted expected future net cash flows. c. the carrying value of the asset to its discounted expected future net cash flows. d. the fair value of the asset to its carrying value. 3. Usually, companies compute depletion for accounting purposes using a. the percentage depletion method. b. a decreasing charge method. c. the straight-line method. d. the units-of-production method. 4. Slotkin Products purchased a machine for $65,000 on July 1, 2025. The company intends to depreciate it over 8 years using the double-declining balance method. The salvage value is $5,000. Depreciation for 2026 to the closest dollar is a. $32,500. b. $8,125. c. $14,219. d. $12,500. On June 1, 2023 DMJ Company purchased factory equipment for $680,000 with an estimated salvage value of $30,000. The estimated useful life for the equipment is 10 years. During 2023, 2024, and 2025 the equipment is depreciated using the straight-line method. During 2026, $80,000 is spent to improve the equipment's efficiency and prolong its useful life. The new useful life is expected to be an additional 10 years beginning in 2026 and the revised salvage value is $45,000. What is depreciation expense on the equipment for 2026 ? a. $50,250 b. $32,500 c. $65,000 d. $47,250

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