Question 1

Golden Eagle Golf Corp sold equipment with an original cost of $160,000 and accumulated depreciation of $95,000.If the sale of the equipment generated a loss of $15,000 how much cash was received from the sale?

Accepted Answer

The answer of Golden Eagle Golf Corp sold equipment with...

Question 2

Harold Lynd Corporation sold equipment with an original cost of $90,000 for $55,000 cash and recorded a gain of $5,000.What was the book value of the equipment on the date of the sale?

Accepted Answer

The book value of the equipment was $50,000. This is calculated by subtracting the gain of $5,000 from the sale price of $55,000. Since a gain occurs when the sale price exceeds the book value, the book value must have been $50,000 ($55,000 - $5,000).

Question 3

Oxford Enterprises acquired a delivery truck on January 4,2010.The total cost of the truck was $87,000.Oxford estimated that the truck would be used for 5 years before being sold for an estimated $16,500.Oxford uses the double-declining balance method of depreciation.The depreciation expense for the year ended December 31,2012 was:

Accepted Answer

The double-declining balance method of depreciation involves doubling the straight-line rate of depreciation. The straight-line depreciation rate for a 5-year life is 20% (100% / 5 years). Therefore, the double-declining balance rate is 40% (20% * 2). For the first year, the depreciation expense is 40% of $87,000, which is $34,800. This reduces the book value to $52,200 ($87,000 - $34,800) for the start of the second year. The second year's depreciation is 40% of $52,200, which is $20,880, reducing the book value to $31,320 ($52,200 - $20,880). For the third year, the depreciation expense is 40% of $31,320, which is $12,528.

Question 4

Horizons,Inc.purchased a machine 3 years ago at a price of $64,500.At that time,useful life was estimated at 12 years with a $6,900 salvage value,and straight-line depreciation was used.After recording depreciation for the 3rd year,Horizons decided that for future years it would revise its original estimates from 12 to 8 years and from $6,900 to $5,500.The depreciation expense to be recorded in year 4 of the machine's life is:

Accepted Answer

The original depreciation per year is calculated based on the original cost minus the salvage value, divided by the useful life: ($64,500 - $6,900) / 12 = $4,800 per year for the first 3 years, totaling $14,400. After 3 years, the book value is $64,500 - $14,400 = $50,100. With the revised estimate, the remaining life is 5 years (8 total minus 3 used), and the new salvage value is $5,500. The new annual depreciation is ($50,100 - $5,500) / 5 = $8,920.

Question 5

Wilkens Corporation acquired a delivery truck on January 4,2010.The total cost of the truck was $138,000.Wilkens estimated that the truck would be used for 10 years before being sold for an estimated $28,500.Wilkens uses the double-declining balance method of depreciation.The carrying value of the truck on January 2,2014 will be:

Accepted Answer

The double-declining balance method of depreciation involves doubling the straight-line rate of depreciation. First, calculate the straight-line depreciation rate: 100% / 10 years = 10% per year. Double this rate for the double-declining balance method, which gives 20% per year. The initial cost of the truck is $138,000. For each year, apply the 20% depreciation rate to the book value at the beginning of the year (not the original cost).Year 1 depreciation: $138,000 * 20% = $27,600. New book value: $138,000 - $27,600 = $110,400.Year 2 depreciation: $110,400 * 20% = $22,080. New book value: $110,400 - $22,080 = $88,320.Year 3 depreciation: $88,320 * 20% = $17,664. New book value: $88,320 - $17,664 = $70,656.Year 4 depreciation: $70,656 * 20% = $14,131.20. New book value: $70,656 - $14,131.20 = $56,524.80.Rounding to the nearest dollar, the carrying value on January 2, 2014, is approximately $56,525.

Question 6

Advanced Systems,Inc.purchased a machine 4 years ago at a price of $82,800.At that time,useful life was estimated at 10 years with a $13,500 salvage value,and straight-line depreciation was used.After recording depreciation for the 4th year,Advanced decided that for future years it would revise its original estimates from 10 to 14 years and from $13,500 to $8,500.The depreciation expense to be recorded in year 5 of the machine's life is:

Accepted Answer

The original annual depreciation was ($82,800 - $13,500) / 10 = $6,930. After 4 years, accumulated depreciation is 4 * $6,930 = $27,720. The book value at the end of year 4 is $82,800 - $27,720 = $55,080. With the revised estimates, the remaining life is 10 years (14 total - 4 used), and the new salvage value is $8,500. The new annual depreciation is ($55,080 - $8,500) / 10 = $4,658.

Question 7

Brookside Enterprises acquired a piece of machinery on January 3,2010.The total cost of the machinery was $138,600.Brookside estimated that the machinery would be used for 77,000 hours before being sold for an estimated $3,850.Brookside uses the units-of-production method of depreciation.Assuming the machine was used for 15,800 hours during 2010,18,300 hours during 2011,and 17,400 hours during 2012,the balance in the accumulated depreciation account on January 2,2013 would be:

Accepted Answer

To calculate the balance in the accumulated depreciation account using the units-of-production method, first, find the depreciation per hour by subtracting the salvage value from the cost and dividing by the total estimated hours of use: ($138,600 - $3,850) / 77,000 hours = $1.75 per hour. Then, multiply the depreciation per hour by the total hours used over the three years: $1.75 * (15,800 + 18,300 + 17,400) = $90,125.

Question 8

Tucker Truck Company acquired a delivery truck on January 4,2010.The total cost of the truck was $71,000.Tucker estimated that the truck would be used for 4 years before being sold for an estimated $7,500.Tucker uses the double-declining balance method of depreciation.The balance in the accumulated depreciation account on January 2,2013 will be:

Accepted Answer

Using the double-declining balance method, the annual depreciation can be calculated as follows:

First-year depreciation = (2/4) x $71,000 = $35,500 
Second-year depreciation = (2/4) x ($71,000 - $35,500) = $17,750 
Third-year depreciation = (2/4) x ($71,000 - $35,500 - $17,750) = $8,875

Therefore, the balance in the accumulated depreciation account on January 2, 2013, which marks the end of the third year, can be calculated as follows:

Accumulated depreciation = $35,500 + $17,750 + $8,875 = $62,125

Hence, the correct answer is B.

Question 9

Spataro Industries owns some equipment with an original cost of $53,800 and accumulated depreciation of $26,350.If the equipment is sold for $25,500,the gain or loss recognized on the sale would be:

Accepted Answer

To calculate the gain or loss recognized on the sale of equipment, we need to subtract the equipment's book value from its selling price. Book value can be calculated as follows:
Original cost - Accumulated depreciation
Therefore, the book value of the equipment is:
$53,800 - $26,350 = $27,450
Since the selling price of the equipment is less than its book value, we will incur a loss on the sale. The amount of the loss is:
$25,500 - $27,450 = $1,950
Therefore, the answer is D, $1,950 loss.

Question 10

Eric Lynd Industries sold equipment with an original cost of $80,000 and accumulated depreciation of $35,000.If the sale of the equipment generated a gain of $10,000 how much cash was received from the sale?

Accepted Answer

To find out how much cash was received, we need to add the gain to the accumulated depreciation to get the book value of the equipment:

Book value = original cost - accumulated depreciation 
Book value = $80,000 - $35,000 
Book value = $45,000

Then, we add the gain to the book value to get the sale price:

Sale price = book value + gain 
Sale price = $45,000 + $10,000 
Sale price = $55,000

Therefore, the answer is C, $55,000.

Question 11

Overhead Industries acquired a piece of machinery on January 3,2010.The total cost of the machinery was $255,000.Overhead estimated that the machinery would be used for 68,000 hours before being sold for an estimated $10,200.Overhead uses the units-of-production method of depreciation.Assuming the machine was used for 12,700 hours during 2010,14,100 hours during 2011,and 13,400 hours during 2012,the carrying value of the machinery on January 2,2013 would be:

Accepted Answer

The units-of-production depreciation method calculates depreciation based on actual usage. The depreciation per hour is ($255,000 - $10,200) / 68,000 hours = $3.60 per hour. Total hours used by January 2, 2013, is 12,700 + 14,100 + 13,400 = 40,200 hours. Total depreciation is 40,200 hours * $3.60 = $144,720. The carrying value is $255,000 - $144,720 = $110,280.

Question 12

Cowboy Enterprises owns some equipment with an original cost of $59,000 and a book value of $19,000 that is exchanged for a $20,000 notes receivable and $5,000 cash.Which of the following is not part of the entry to record this transaction?

Accepted Answer

The correct entry to record the exchange includes debiting Notes Receivable and Cash for the amounts received, debiting Accumulated Depreciation for the amount of depreciation that has been recorded against the equipment (which is the difference between the original cost and the book value, $59,000 - $19,000 = $40,000), and crediting Equipment for its original cost ($59,000). The gain is calculated as the total consideration received ($20,000 + $5,000 = $25,000) minus the book value of the equipment ($19,000), which equals $6,000. Therefore, the correct entry does not credit Equipment for $19,000; it should credit Equipment for its original cost.

Question 13

Cooper Resources,Inc.owns some equipment with an original cost of $53,800 and accumulated depreciation of $26,350.If the equipment is sold for $28,500,the gain or loss recognized on the sale would be:

Accepted Answer

The book value of the equipment is calculated as the original cost minus accumulated depreciation, which is $53,800 - $26,350 = $27,450. Selling the equipment for $28,500 results in a gain of $28,500 - $27,450 = $1,050.

Question 14

Galloway Corporation sold equipment with an original cost of $120,000 for $55,000 cash and recorded a loss of $15,000.What was the balance in the accumulated depreciation account on the date of the sale?

Accepted Answer

The balance in the accumulated depreciation account on the date of the sale is $60,000. This is because the original cost of the equipment was $120,000, the selling price was $55,000, and the loss on the sale was $15,000. Therefore, the accumulated depreciation must have been $60,000 ($120,000 - $55,000 - $15,000).

Question 15

Sportech,Inc.acquired a piece of equipment on January 3,2010.The total cost of the equipment was $77,500.Sportech estimated that the equipment would be used for 9 years before being sold for an estimated $5,500.Assuming the use of straight-line depreciation,the balance in the accumulated depreciation account on January 2,2014 will be:

Accepted Answer

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Question 16

Chippawa Industries acquired a delivery truck on January 4,2010.The total cost of the truck was $145,000.Chippawa estimated that the truck would be used for 8 years before being sold for an estimated $23,500.Chippawa uses the double-declining balance method of depreciation.The total depreciation expense for the year ended December 31,2010 was:

Accepted Answer

The double-declining balance method calculates depreciation by doubling the straight-line rate. The straight-line rate is 1/8 = 12.5%, so the double-declining rate is 25%. The first year's depreciation is 25% of $145,000, which is $36,250.

Question 17

Windstreamers,Inc.acquired a piece of machinery on January 3,2010.The total cost of the machinery was $68,400.Windstreamers estimated that the machinery would be used to produce 100,000 units of product before being sold for an estimated $11,600.Windstreamers uses the units-of-production method of depreciation.Assuming the machine produced 18,500 units during the year ended December 31,2010,the 2008 depreciation expense was:

Accepted Answer

The answer of Windstreamers,Inc.acquired a piece of machinery on January...

Question 18

Irmelas Enterprises owns some equipment with an original cost of $84,700 and accumulated depreciation of $41,650.If the equipment is sold for $9,500 in cash plus a 9-month $30,000 note receivable with a stated 12% interest rate,the gain or loss recognized on the sale would be:

Accepted Answer

The answer of Irmelas Enterprises owns some equipment with an...

Question 19

Dynatech Corporation acquired a piece of machinery on January 3,2010.The total cost of the machinery was $172,500.Dynatech estimated that the machinery would be used for 60,000 hours before being sold for an estimated $7,500.Dynatech uses the units-of-production method of depreciation.Assuming the machine was used for 18,750 hours during the year ended December 31,2010,the depreciation expense rate per hour for 2010 was:

Accepted Answer

The answer of Dynatech Corporation acquired a piece of machinery...

Question 20

Edcon Industries acquired a piece of equipment on January 3,2010.The total cost of the equipment was $43,700.Edcon estimated that the equipment would be used for 7 years before being sold for an estimated $5,200.Assuming the use of straight-line depreciation,the carrying value of the equipment on January 2,2015 will be:

Accepted Answer

The answer of Edcon Industries acquired a piece of equipment...

Quiz 16: Recording and Evaluating Capital Resource Process Activities: Investing