Question 1

On April 1,Year 5 a company discarded a machine that had cost $10,000 and had accumulated depreciation of $8,000 as of December 31,Year 4.The asset had a 5-year life and no salvage value.Prepare the journal entries to record the updating of the depreciation expense and discarding of this asset in Year 5.

Accepted Answer

The answer of On April 1,Year 5 a company discarded...

Question 2

Natural resources are:

Accepted Answer

A) Consumable assets such standing timber,mineral deposits,and oil and gas fields. 
B) Tangible assets used in the operations of the business. 
C) Current assets because they are depleted. 
D) Not subject to allocation to expense over their useful lives. 
E) Depleted using a straight-line method.

Question 3

A change in an accounting estimate is:

Accepted Answer

A) Reflected in past financial statements. 
B) Reflected in future financial statements and also requires modification of past statements. 
C) Reflected in current and future years' financial statements,not in prior statements. 
D) Not allowed under current accounting rules. 
E) Considered an error in the financial statements.

Question 4

On September 30 of the current year,a company acquired and placed in service a machine at a cost of $700,000.It has been estimated that the machine has a service life of five years and a salvage value of $40,000.Using the double-declining-balance method of depreciation,complete the schedule below showing depreciation amounts for all six years (round answers to the nearest dollar).The company closes its books on December 31 of each year.

Accepted Answer

The answer of On September 30 of the current year,a...

Question 5

The depreciation method that allocates an equal portion of the total depreciable cost for a plant asset to each unit produced is called:

Accepted Answer

A) Accelerated depreciation. 
B) Declining-balance depreciation. 
C) Straight-line depreciation. 
D) Units-of-production depreciation. 
E) Modified accelerated cost recovery system (MACRS)depreciation.

Question 6

A company used straight-line depreciation for an item of equipment that cost $12,000,had a salvage value of $2,000 and a five-year useful life.After depreciating the asset for three complete years,the salvage value was reduced to $1,200 but its total useful life remained the same.Determine the amount of depreciation to be charged against the equipment during each of the remaining years of its useful life.

Accepted Answer

A) $1,000 
B) $1,800 
C) $5,400 
D) $2,400 
E) $2,000

Question 7

A company purchased a weaving machine for $190,000.The machine has a useful life of 8 years and a residual value of $10,000.It is estimated that the machine could produce 75,000 bolts of woven fabric over its useful life.In the first year,15,000 bolts were produced.In the second year,production increased to 19,000 units.Using the units-of-production method,what is the amount of accumulated depreciation at the end of the second year?

Accepted Answer

A) $48,133. 
B) $45,600. 
C) $86,133. 
D) $23,750. 
E) $81,600.

Question 8

A company paid $595,000 for property that included land appraised at $384,000;land improvements appraised at $128,000;and a building appraised at $288,000.The plan is to use the building as a manufacturing plant.Determine the amounts that should be recorded as:

Accepted Answer

The answer of A company paid $595,000 for property that...

Question 9

Martinez owns machinery that cost $87,000 with accumulated depreciation of $40,000.The company sells the machinery for cash of $42,000.The journal entry to record the sale would include:

Accepted Answer

A) A credit to Accumulated Depreciation of $40,000. 
B) A credit to Gain on Sale of $2,000. 
C) A credit to Machinery of $47,000. 
D) A debit to Cash of $42,000. 
E) A debit to Accumulated Depreciation of $47,000.

Question 10

Marlow Company purchased a point of sale system on January 1 for $3,400.This system has a useful life of 10 years and a salvage value of $400.What would be the depreciation expense for the first year of its useful life using the double-declining-balance method?

Accepted Answer

A) $680. 
B) $2,320. 
C) $2,720. 
D) $600. 
E) $300.

Question 11

The specific meaning of goodwill in accounting is:

Accepted Answer

A) The amount by which a company's value exceeds the value of its individual assets and liabilities. 
B) Long term assets held as investment. 
C) The support of the board of directors for the operating decisions of management. 
D) The cost of developing,maintaining,or enhancing the value of a trademark. 
E) Rights granted an entity to deliver a product or service under specified conditions.

Question 12

Plant assets are defined as:

Accepted Answer

A) Tangible assets that have a useful life of more than one accounting period and are used in the operation of a business. 
B) Current assets. 
C) Held for sale. 
D) Intangible assets used in the operations of a business that have a useful life of more than one accounting period. 
E) Tangible assets used in the operation of business that have a useful life of less than one accounting period.

Question 13

A company purchased a delivery van for $28,000 with a salvage value of $3,000 on September 1,Year 1.It has an estimated useful life of 5 years.Using the straight-line method,how much depreciation expense should the company recognize on December 31,Year 1?

Accepted Answer

A) $5,000. 
B) $1,667. 
C) $1,400. 
D) $1,250. 
E) $2,067.

Question 14

The term,obsolescence,as it relates to the useful life of an asset,refers to:

Accepted Answer

A) The end of an asset's useful life. 
B) A plant asset that is no longer useful in producing goods and services with a competitive advantage. 
C) The insufficient capacity of a company's plant assets to meet the company's productive demands. 
D) An asset's salvage value becoming less than its replacement cost. 
E) Intangible assets that have been fully amortized.

Question 15

A company had a tractor destroyed by fire.The tractor originally cost $85,000 with accumulated depreciation of $60,000.The proceeds from the insurance company were $20,000.The company should recognize:

Accepted Answer

A) A loss of $5,000. 
B) A gain of $5,000. 
C) A loss of $20,000. 
D) A gain of $65,000. 
E) A gain of $20,000.

Question 16

When originally purchased,a vehicle costing $23,000 had an estimated useful life of 8 and an estimated salvage value of $1,500.After 4 years of straight-line depreciation,the asset's total estimated useful life was revised from 8 years to 6 years and there was no change in the estimated salvage value.The depreciation expense in year 5 equals:

Accepted Answer

A) $5,375.00. 
B) $2,687.50. 
C) $5,543.75. 
D) $10,750.00. 
E) $2,856.25.

Question 17

The straight-line depreciation method and the double-declining-balance depreciation method:

Accepted Answer

A) Produce the same total depreciation over an asset's useful life. 
B) Produce the same depreciation expense each year. 
C) Produce the same book value each year. 
D) Are acceptable for tax purposes only. 
E) Are the only acceptable methods of depreciation for financial reporting.

Question 18

Once the estimated depreciation expense for an asset is calculated:

Accepted Answer

A) It cannot be changed,based on the historical cost principle. 
B) It may be revised based on new information. 
C) Any changes are accumulated and recognized when the asset is sold. 
D) The estimate itself cannot be changed;however,new information should be disclosed in financial statement footnotes. 
E) It cannot be changed,based on the consistency principle.

Question 19

Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000.The machine's useful life is estimated to be 5 years,or 300,000 units of product,with a $15,000 salvage value.During its first year,the machine produces 64,500 units of product.Determine the machines' first year depreciation under the double-declining-balance method.

Accepted Answer

A) $66,000. 
B) $54,000. 
C) $24,000. 
D) $25,800. 
E) $48,000.

Question 20

Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $87,000.The machine's useful life is estimated to be 5 years,or 400,000 units of product,with a $7,000 salvage value.During its second year,the machine produces 84,500 units of product.Determine the machines' second year depreciation under the units-of-production method.

Accepted Answer

A) $16,900. 
B) $16,000. 
C) $17,400. 
D) $18,379. 
E) $20,880.

Exam 10: Plant Assets, Natural Resources, and Intangibles