CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

Bay Tree Company purchased a machine for $ 264,000 on 1/1/2012 and depreciated it using the straight-line method with an estimated useful life of eight years and no expected salvage value. Bay Tree determined in January 2015 that the machinery would likely have only three remaining years of life and an expected salvage value of $24,000. The balance in accumulated depreciation as of 12/31/2015 should be ______.

A. $146,000
B. $154,000
C. $160,000
Correct Answer: A

Depreciation Expense per year (2012 - 2014)= $264,000/8= $33,000
Depreciation Expense (2015) ($165,000 carrying amount** -24,000)/3 yrs = $47,000
Accumulated Depreciation= $146,000 = ($33,000 x 3 years= 99,000) + $47,000

** carrying amount = original cost - accumulated depreciation = $264,000 - (33,000 x 3)

User Contributed Comments 3

User Comment
jonan203 HP12C

264,000 <enter><enter>
8 <divide>
3 <times><sto> 1 <minus>
24,000 <minus>
3 <divide><rcl> 1 <plus>

total calculation time = 10 seconds
Shaan23 Just because the solution seems long written out doesnt mean it takes long.

I punched in the numbers using logic and got to the answer in 20 seconds.

I do NOT recommend the calculator for this section. Understand the logic to get all answers right not just the numerical based ones.
farhan92 using straight line depreciation/year =33 -for 3 years (99)
asset value in 2015 = 264 - 99 =165

165-24/3 =47

47+99 = bobs your uncle
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