Final Acct 201 - Ch9

Danford Trucking purchased a tractor trailer for $126,000. Danford uses the units-of-activity method for depreciating its trucks and expects to drive the truck 1,000,000 miles over its 12-year useful life. Salvage value is estimated to be $18,000. If the truck is driven 80,000 miles in its first year, how much depreciation expense should Danford record?

1. ($126,000 - $18,000) ÷ 1,000,000 = 0.108 2. 0.108 × 80,000 = $8,640

Ron's Quik Shop bought equipment for $70,000 on January 1, 2013. Ron estimated the useful life to be 5 years with no salvage value, and the straight-line method of depreciation will be used. On January 1, 2014, Ron decides that the business will use the equipment for a total of 6 years. What is the revised depreciation expense for 2014?

1. ($70,000 - 0) ÷ 5 = $14,000 2. ($70,000 - $14,000) ÷ (6 - 1) = $11,200

On January 1, a machine with a useful life of five years and a residual value of $40,000 was purchased for $120,000. What is the depreciation expense for year 2 under the double-declining-balance method of depreciation?

1. 120,000/5 = 24,000 2. 24,000/120,000 = 0.2 3. 0.2 x 2 = 0.4 4. Year 1: $120,000 × .40 = $48,000 5. Year 2: ($120,000 - $48,000) × .40 = $28,800

Equipment with a cost of $225,000 has an estimated salvage value of $15,000 and an estimated life of 4 years or 10,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 2,700 hours?

($225,000 - $15,000) ÷ 4 = $52,500

A company sells a plant asset that originally cost $225,000 for $75,000 on December 31, 2014. The accumulated depreciation account had a balance of $90,000 after the current year's depreciation of $22,500 had been recorded. The company should recognize a A. $60,000 gain on disposal. B. $60,000 loss on disposal. C. $37,500 loss on disposal. D. $150,000 loss on disposal.

$75,000 - ($225,000 - $90,000) = ($60,000) B. $60,000 loss on disposal.

A company sells a plant asset that originally cost $240,000 for $80,000 on December 31, 2014. The accumulated depreciation account had a balance of $120,000 after the current year's depreciation of $20,000 had been recorded. The company should recognize a A. $40,000 gain on disposal. B. $80,000 loss on disposal. C. $80,000 gain on disposal. D. $40,000 loss on disposal.

$80,000 - ($240,000 - $120,000) = ($40,000) D. $40,000 loss on disposal.

The book value of a plant asset is the difference between the A. proceeds received from the sale of the asset and its original cost. B. replacement cost of the asset and its historical cost. C. cost of the asset and the amount of depreciation expense for the year. D. cost of the asset and the accumulated depreciation to date.

D. cost of the asset and the accumulated depreciation to date.

A company has the following assets: 1. Buildings and Equipment, - less accumulated depreciation of $5,000,000 - $35,000,000 2. Copyrights - 2,400,000 3. Patents - 10,000,000 4. Land - 12,000,000 The total amount reported under Property, Plant, and Equipment would be

$35,000,000 + $12,000 = $47,000,000

Carpino Company purchased equipment and these costs were incurred: Cash price - $70,000 Sales taxes - 3,500 Insurance during transit - 750 Installation and testing - 1,500 Total costs - $75,750 What's amount should be recorded as the cost of the Equipment?

$75,750

Vickers Company uses the units-of-activity method in computing depreciation. A new plant asset is purchased for $36,000 that will produce an estimated 100,000 units over its useful life. Estimated salvage value at the end of its useful life is $3,000. What is the depreciation cost per unit?

($36,000 - $3,000) ÷ 100,000 = $0.33

Pearson Company bought a machine on January 1, 2014. The machine cost $144,000 and had an expected salvage value of $24,000. 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

1. ($144,000 - $24,000) ÷ 5 = $24,000 2. $24,000 × 2 = $48,000 3. $144,000 - 48,000 = $96,000

Pearson Company bought a machine on January 1, 2014. The machine cost $144,000 and had an expected salvage value of $24,000. The life of the machine was estimated to be 5 years. The depreciable cost of the machine is

$144,000 - $24,000 = $120,000

Cost allocation of an intangible asset is referred to as A. accretion. B. capitalization. C. amortization. D. depreciation.

C. amortization.

Mitchell Corporation bought equipment on January 1, 2014 .The equipment cost $180,000 and had an expected salvage value of $30,000. The life of the equipment was estimated to be 6 years. The depreciation expense using the straight-line method of depreciation is

($180,000 - $30,000) ÷ 6 = $25,000

Equipment was purchased for $90,000. Freight charges amounted to $4,200 and there was a cost of $12,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $18,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be.

(Cost - Salvage value) / Useful life = Depreciation expense (90,000 + 4,200 + 12,000)/5 = $17640

On July 1, 2014, Linden Company purchased the copyright to Norman Computer Tutorials for $140,000. It is estimated that the copyright will have a useful life of 5 years. The amount of Amortization Expense recognized for the year 2014 would be

1. $140,000 ÷ 5 = 28,000 2. 28,000 × 6/12 = $14,000

A machine with a cost of $480,000 has an estimated salvage value of $30,000 and an estimated useful life of 5 years or 15,000 hours. It is to be depreciated using the units-of-activity method of depreciation. What is the amount of depreciation for the second full year, during which the machine was used 5,000 hours?

1. ($480,000 - $30,000) ÷ 15,000 = $30 2. $30 × 5,000 = $150,000

Rains Company purchased equipment on January 1 at a list price of $75,000, with credit terms 2/10, n/30. Payment was made within the discount period. Rains paid $3,750 sales tax on the equipment, and paid installation charges of $1,320. Prior to installation, Rains paid $3,000 to pour a concrete slab on which to place the equipment. What is the total cost of the new equipment?

(75,000 x 98%) + 3,750 + 1,320 + 3,000 = 81,570

Brevard Corporation purchased a taxicab on January 1, 2013 for $25,500 to use for its shuttle business. The cab is expected to have a five-year useful life and no salvage value. During 2014, it retouched the cab's paint at a cost of $1,200, replaced the transmission for $3,000 (which extended its life by an additional 2 years), and tuned-up the motor for $150. If Brevard Corporation uses straight-line depreciation, what annual depreciation will Brevard report for 2014?

1. 25,500/5 = 5,100 2. [($25,500 - $5,100) + $3 000] ÷ (5 - 1 + 2) = $3,900

Foyle Company purchased a new van for floral deliveries on January 1, 2014. The van cost $48,000 with an estimated life of 5 years and $12,000 salvage value at the end of its useful life. The double-declining-balance method of depreciation will be used. What is the depreciation expense for 2014?

1. 48,000/5 = 0.2 2. 0.2 x 2 = 0.4 2. $48,000 × .40 = $19,200

Arnold Company purchases a new delivery truck for $40,000. The sales taxes are $2,500. The logo of the company is painted on the side of the truck for $1,200. The truck's annual license is $120. The truck undergoes safety testing for $220. What does Arnold record as the cost of the new truck?

40,000 + 2,500 + 1,200 + 220 = 43,920

Kathy's Blooms purchased a delivery van with a $50,000 list price. The company was given a $5,000 cash discount by the dealer, and paid $2,500 sales tax. Annual insurance on the van is $1,250. As a result of the purchase, by how much will Kathy's Blooms increase its van account?

50,000 - 5,000 + 2,500 = 47,500

Conley Company purchased equipment for $60,000 on January 1, 2012, and will use the double-declining-balance method of depreciation. It is estimated that the equipment will have a 5-year life and a $3,000 salvage value at the end of its useful life. The amount of depreciation expense recognized in the year 2014 will be

1. 60,000/5 = 12,000 2. 12,000/60,000 = 0.2 3. 0.2 x 2 = 0.4 4. 2012: $60,000× .40 = $24,000 5. 2013: ($60,000 - $24,000) × .40 = $14,400 6. 2014: ($60,000 - $38,400) × .40 = $8,640

Equipment costing $70,000 with a salvage value of $14,000 and an estimated life of 8 years has been depreciated using the straight-line method for 2 years. Assuming a revised estimated total life of 6 years and no change in the salvage value, the depreciation expense for Year 3 would be

1. [($70,000 - $14,000) ÷ 8] × 2 = $14.000 2. [($70,000 - $14,000) - $14,000] ÷ (6 - 2) = $10,500 1. (Equipment cost - salvage value)/ years estimated life) = x 2. [(Equipment cost - salvage value) - x]/ (Total life - straight line method) = y

The cost of an intangible asset with an indefinite life should A. be amortized over the life of the creator plus 70 years. B. be amortized over 20 years. C. not be amortized. D. None of these answer choices are correct.

C. not be amortized.