Question 1

Newell Company purchased a machine with a list price of $160000.The company was given a 10% discount by the manufacturer and paid $1000 for shipping and sales tax of $7500.Newell estimates that the machine will have a useful life of 10 years and a salvage value of $50000.If Newell uses straight-line depreciation annual depreciation will be
A)$10250.
B)$10180.
C)$15250.
D)$9400.

Accepted Answer

The cost of the machine is $160,000 - 10% discount = $144,000. Adding shipping and sales tax, the total cost is $144,000 + $1,000 + $7,500 = $152,500. The depreciable amount is $152,500 - $50,000 (salvage value) = $102,500. Dividing by 10 years, the annual depreciation is $10,250.

Question 2

On January 1 a machine with a useful life of five years and a salvage value of $25000 was purchased for $125000.What is the depreciation expense for year 2 under straight-line depreciation?
A)$15000.
B)$75000.
C)$20000.
D)$60000.

Accepted Answer

Under straight-line depreciation, the annual depreciation expense is calculated by taking the cost of the asset minus the salvage value and dividing by the useful life. 
Annual depreciation expense = (Cost - Salvage Value)/Useful Life

In this case, the cost of the machine is $125,000, the salvage value is $25,000 and the useful life is 5 years.

Annual depreciation expense = ($125,000 - $25,000)/5 = $20,000

Therefore, the depreciation expense for year 2 would be the same as the annual depreciation expense, which is $20,000. So, the best choice is C.

Question 3

Mitchell Corporation bought equipment on January 1 2022.The equipment cost $300000 and had an expected salvage value of $50000.The life of the equipment was estimated to be 6 years.The depreciation expense using the straight-line method of depreciation is
A)$58333.
B)$60000.
C)$41667.
D)none of these answer choices are correct.

Accepted Answer

The straight-line depreciation method depreciates an equal amount each year over the useful life of the asset. To find the annual depreciation expense using this method, we subtract the salvage value from the cost and divide by the useful life.

Annual depreciation expense = (Cost - Salvage value) / Useful life 
= ($300,000 - $50,000) / 6 
= $41,667

Therefore, the correct answer is C – $41,667.

Question 4

Pearson Company bought a machine on January 1 2022.The machine cost $180000 and had an expected salvage value of $30000.The life of the machine was estimated to be 5 years.The depreciable cost of the machine is
A)$180000.
B)$150000.
C)$50000.
D)$30000.

Accepted Answer

The depreciable cost of the asset is the original cost minus the salvage value, which gives us:

Depreciable cost = Cost of asset - Salvage value
Depreciable cost = $180,000 - $30,000
Depreciable cost = $150,000

Therefore, the correct choice is B) $150,000.

Question 5

A plant asset was purchased on January 1 for $75000 with an estimated salvage value of $15000 at the end of its useful life.The current year's depreciation expense is $5000 calculated on the straight-line basis and the balance of the Accumulated Depreciation account at the end of the year is $35000.The remaining useful life of the plant asset is
A)15 years.
B)12 years.
C)7 years.
D)5 years.

Accepted Answer

The answer of A plant asset was purchased on January...

Question 6

Mitchell Corporation bought equipment on January 1 2022.The equipment cost $300000 and had an expected salvage value of $50000.The life of the equipment was estimated to be 6 years.The book value of the equipment at the beginning of the third year would be
A)$300000.
B)$250000.
C)$216666.
D)$83333.

Accepted Answer

The equipment has a life of 6 years, so the depreciation expense per year would be ($300,000 - $50,000) / 6, which is $41,666.67. At the beginning of the third year, two years of depreciation would have been taken, so the accumulated depreciation would be 2 x $41,666.67 = $83,333.33. The book value of the equipment at the beginning of the third year would be the cost of the equipment minus the accumulated depreciation, which is $300,000 - $83,333.33 = $216,666.67. Therefore, the best choice is C.

Question 7

Pearson Company bought a machine on January 1 2022.The machine cost $180000 and had an expected salvage value of $30000.The life of the machine was estimated to be 5 years.The book value of the machine at the beginning of the third year would be
A)$180000.
B)$150000.
C)$120000.
D)$60000.

Accepted Answer

To find the book value of the machine at the beginning of the third year, we need to calculate the annual depreciation first. The formula to calculate annual depreciation using the straight-line method is:
Annual Depreciation = (Cost - Salvage Value) / Useful Life

Annual Depreciation = ($180,000 - $30,000) / 5 = $30,000

Now we can calculate the book value at the beginning of the third year:
Book Value = Cost - Accumulated Depreciation
Accumulated Depreciation = Annual Depreciation x Number of Years
Accumulated Depreciation = $30,000 x 2 = $60,000

Book Value = $180,000 - $60,000 = $120,000

Therefore, the book value of the machine at the beginning of the third year would be $120,000. The correct answer is choice C.

Question 8

Bates Company purchased equipment on January 1 2021 at a total invoice cost of $1200000.The equipment has an estimated salvage value of $30000 and an estimated useful life of 5 years.What is the amount of accumulated depreciation at December 31 2022 if the straight-line method of depreciation is used?
A)$240000.
B)$480000.
C)$234000.
D)$468000.

Accepted Answer

The answer of Bates Company purchased equipment on January 1...

Question 9

Which of the following methods of computing depreciation is production based?
A)Straight-line.
B)Declining-balance.
C)Units-of-activity.
D)None of these answer choices are correct.

Accepted Answer

Units-of-activity method of computing depreciation is production based as it calculates depreciation based on the number of units produced or hours of machine usage. This method is best suited for assets that may not be used evenly throughout the year or have different levels of usage over time. Straight-line and declining-balance methods are not production-based as they allocate depreciation equally over the useful life of an asset or based on a percentage of the asset's book value, respectively.

Question 10

The depreciation method that applies a constant percentage to depreciable cost in calculating depreciation is
A)straight-line.
B)units-of-activity.
C)sum-of-year's-digits.
D)None of these answer choices are correct.

Accepted Answer

The answer of The depreciation method that applies a constant...

Question 11

On November 1 2021
A)$4000.
B)$16000.
C)$2667.
D)$9000.

Accepted Answer

The answer of On November 1 2021
A)$4000.
B)$16000.
C)$2667.
D)$9000....

Question 12

On October 1 2022 Mann Company places a new asset into service.The cost of the asset is $120000 with an estimated 5-year life and $30000 salvage value at the end of its useful life.What is the depreciation expense for 2022 if Mann Company uses the straight-line method of depreciation?
A)$4500.
B)$24000.
C)$6000.
D)$12000.

Accepted Answer

Depreciation expense = (Cost of asset - Salvage value) / Useful life= (120000 - 30000) / 5= 90000 / 5= $18000Depreciation expense for 2022 = 18000 * (10/12)= $15000

Question 13

Management should select the depreciation method that
A)is easiest to apply.
B)best measures the plant asset's market value over its useful life.
C)best measures the plant asset's contribution to revenue over its useful life.
D)has been used most often in the past by the company.

Accepted Answer

The depreciation method chosen by management should best reflect the plant asset's contribution to revenue over its useful life. This approach ensures that the expense recognized in the income statement matches the revenue generated by the asset, adhering to the matching principle in accounting.

Question 14

Mitchell Corporation bought equipment on January 1 2022.The equipment cost $300000 and had an expected salvage value of $50000.The life of the equipment was estimated to be 6 years.The depreciable cost of the equipment is
A)$300000.
B)$250000.
C)$50000.
D)$41667.

Accepted Answer

The answer of Mitchell Corporation bought equipment on January 1...

Question 15

The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method that
A)is used for tax purposes.
B)must be used for financial statement purposes.
C)is required by the SEC.
D)expenses an asset over a single year because capital acquisitions must be expensed in the year purchased.

Accepted Answer

MACRS is a depreciation method used for tax purposes. It is not required to be used for financial statement purposes, nor is it required by the SEC. Option D is incorrect, as MACRS is a method that expenses an asset over multiple years, not a single year.

Question 16

On January 1 a machine with a useful life of four years and a salvage value of $16000 was purchased for $80000.What is the depreciation expense for year 2 under straight-line depreciation?
A)$20000.
B)$32000.
C)$16000.
D)$40000.

Accepted Answer

The answer of On January 1 a machine with a...

Question 17

Pearson Company bought a machine on January 1 2022.The machine cost $180000 and had an expected salvage value of $30000.The life of the machine was estimated to be 5 years.The depreciation expense using the straight-line method of depreciation is
A)$50000.
B)$36000.
C)$30000.
D)none of these answer choices are correct.

Accepted Answer

The answer of Pearson Company bought a machine on January...

Question 18

Which depreciation method is most frequently used in businesses today?
A)Straight-line.
B)Declining-balance.
C)Units-of-activity.
D)Double-declining-balance.

Accepted Answer

Straight-line depreciation is the most commonly used method in businesses today. It is simple and easy to calculate, and provides a consistent depreciation expense each year. Other methods, such as declining-balance or double-declining-balance, may provide larger depreciation expenses in the early years but can become complicated to calculate and may not provide a consistent expense each year. Units-of-activity may be more appropriate for certain assets, such as vehicles, that are used more heavily in some years than others.

Question 19

Stine Company purchased machinery with a list price of $96000.The company was given a 10% discount by the manufacturer.They paid $600 for shipping and sales tax of $4500.Stine estimates that the machinery will have a useful life of 10 years and a residual value of $30000.If Stine uses straight-line depreciation annual depreciation will be
A)$6150.
B)$6108.
C)$9150.
D)$5640.

Accepted Answer

The cost of the machinery is $96000 - 10% discount = $86400. Adding shipping and sales tax, the total cost is $86400 + $600 + $4500 = $91500. The depreciable amount is $91500 - $30000 (residual value) = $61500. Annual depreciation is $61500 / 10 years = $6150.

Question 20

A plant asset was purchased on January 1 for $55000 with an estimated salvage value of $5000 at the end of its useful life.The current year's depreciation expense is $5000 calculated on the straight-line basis and the balance of the Accumulated Depreciation account at the end of the year is $25000.The remaining useful life of the plant asset is
A)10 years.
B)11 years.
C)6 years.
D)5 years.

Accepted Answer

The answer of A plant asset was purchased on January...

Quiz 7: Reporting and Analyzing Liabilities and Stockholders Equity

On January 1 a machine with a useful life of five years and a salvage value of $25000 was purchased for $125000.What is the depreciation expense for year 2 under straight-line depreciation?

Mitchell Corporation bought equipment on January 1 2022.The equipment cost $300000 and had an expected salvage value of $50000.The life of the equipment was estimated to be 6 years.The depreciation expense using the straight-line method of depreciation is

Pearson Company bought a machine on January 1 2022.The machine cost $180000 and had an expected salvage value of $30000.The life of the machine was estimated to be 5 years.The depreciable cost of the machine is

Mitchell Corporation bought equipment on January 1 2022.The equipment cost $300000 and had an expected salvage value of $50000.The life of the equipment was estimated to be 6 years.The book value of the equipment at the beginning of the third year would be

Pearson Company bought a machine on January 1 2022.The machine cost $180000 and had an expected salvage value of $30000.The life of the machine was estimated to be 5 years.The book value of the machine at the beginning of the third year would be

Which of the following methods of computing depreciation is production based?

The depreciation method that applies a constant percentage to depreciable cost in calculating depreciation is

On November 1 2021

On October 1 2022 Mann Company places a new asset into service.The cost of the asset is $120000 with an estimated 5-year life and $30000 salvage value at the end of its useful life.What is the depreciation expense for 2022 if Mann Company uses the straight-line method of depreciation?

Management should select the depreciation method that

Mitchell Corporation bought equipment on January 1 2022.The equipment cost $300000 and had an expected salvage value of $50000.The life of the equipment was estimated to be 6 years.The depreciable cost of the equipment is

The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method that

On January 1 a machine with a useful life of four years and a salvage value of $16000 was purchased for $80000.What is the depreciation expense for year 2 under straight-line depreciation?

Pearson Company bought a machine on January 1 2022.The machine cost $180000 and had an expected salvage value of $30000.The life of the machine was estimated to be 5 years.The depreciation expense using the straight-line method of depreciation is

Which depreciation method is most frequently used in businesses today?