ACCT 201 DSM9

A piece of equipment costs $300,000 and has $60,000 of depreciation expense each year using the straight-line method. What is the book value at the end of the third year? After 3 years, accumulated depreciation would be ($60,000 * 3 years) = $180,000. Book value is calculated by taking the cost of $300,000 - $180,000 accumulated depreciation = $120,000.

$120,000

Base Electronics has a piece of machinery that costs $400,000 and is expected to have a useful life of 5 years. Residual value is expected to be $50,000. Using the double-declining-balance method, what is depreciation expense for the first year? The double-declining-balance method multiplies the asset's book value (cost less accumulated depreciation) times twice the straight-line rate. Double-declining-balance rate is 2 * (1 / 5 years) = 40%. To calculate depreciation expense for the first year take the (cost of $400,000 - $0 accumulated depreciation) * .40 rate = $160,000. Residual value is only taken out of the last year in double-declining-balance method.

$160,000

Mason Company purchases a piece of land for $200,000. Mason Company paid $4,000 in brokerage commissions, $12,000 to clear and remove an unwanted building, $4,000 for building permits to construct a new building, $600,000 to construct a new building, and $2,000 in delinquent property taxes. What is the amount to be capitalized (debited) to the Land account from this purchase? Amounts to be capitalized to Land would be the purchase price of $200,000, $4,000 in brokerage commissions, $12,000 to clear and remove an unwanted building, and $2,000 in delinquent property taxes for a total of $218,000.

$218,000

A piece of equipment was purchased two years ago for $50,000 and now has accumulated depreciation of $46,000. Suppose the piece of equipment was sold for $1,000. What is the result of this disposal transaction? The book value at the time of the sale is ($50,000 - $46,000) = $4,000. It sold for $1,000 which is $3,000 below book value, so there would be a $3,000 loss.

$3,000 Loss

Top Line Electronics has a piece of machinery that costs $600,000 and is expected to have a useful life of 4 years. Residual value is expected to be $100,000. Using the double-declining-balance method, what is depreciation expense for the first year? The double-declining-balance method multiplies the asset's book value (cost less accumulated depreciation) times twice the straight-line rate. Double-declining-balance rate is 2 * (1 / 4 years) = 50%. To calculate depreciation expense for the first year take the (cost of $600,000 - $0 accumulated depreciation) * .50 rate = $300,000. Residual value is only taken out of the last year in double-declining-balance method.

$300,000

Jones Company purchases a piece of land for $300,000. Jones Company paid $3,000 in brokerage commissions, $10,000 to clear and remove an unwanted building, $5,000 for building permits to construct a new building, $500,000 to construct a new building, and $5,000 in delinquent property taxes. What is the amount to be capitalized (debited) to the Land account from this purchase? Amounts to be capitalized to Land would be the purchase price of $300,000, $3,000 in brokerage commissions, $10,000 to clear and remove an unwanted building, and $5,000 in delinquent property taxes for a total of $318,000

$318,000

Casey Electronics has a piece of machinery that costs $300,000 and is expected to have a useful life of 6 years or 40,000 hours. Residual value is expected to be $50,000. Using the units-of-production method, what is depreciation expense for the first year assuming it was used 6,000 hours? The units-of-production method allocates depreciation based on the usage of the asset. The first step is calculating depreciation per unit by dividing the cost less residual value by the useful life in units. In this problem, we calculate ($300,000 - $50,000) / 40,000 hours = $6.25 per machine hour as the deprecation rate per unit. This amount is multiplied by the actual usage for the year. In this case, 6,000 hours * $6.25 depreciation rate = $37,500 for depreciation expense.

$37,500

Jones Company purchases a piece of land for $300,000. Jones Company paid $3,000 in brokerage commissions, $10,000 to clear and remove an unwanted building, $5,000 for building permits to construct a new building, $500,000 to construct a new building, and $5,000 in delinquent property taxes. What is the amount to be capitalized (debited) to the Building account? Capitalized (debited) to the Building account would be the $5,000 for building permits to construct a new building and the $500,000 to construct a new building for a total of $505,000. The other items are capitalized to Land.

$505,000

Base Electronics has a piece of machinery that costs $400,000 and is expected to have a useful life of 5 years or 100,000 hours. Residual value is expected to be $50,000. Using the units-of-production method, what is depreciation expense for the first year assuming it was used 16,000 hours? The units-of-production method allocates depreciation based on the usage of the asset. The first step is calculating depreciation per unit by dividing the cost less residual value by the useful life in units. In this problem, we calculate ($400,000 - $50,000) / 100,000 hours = $3.50 per machine hour as the deprecation rate per unit. This amount is multiplied by the actual usage for the year. In this case, 16,000 hours * $3.50 depreciation rate = $56,000 for depreciation expense.

$56,000

Base Electronics has a piece of machinery that costs $400,000 and is expected to have a useful life of 5 years. Residual value is expected to be $50,000. Using the straight-line method, what is depreciation expense for the first year? Straight-line depreciation allocates an equal amount of depreciation to each year and is calculated by dividing the cost less residual value by the useful life. In this problem, annual depreciation is ($400,000 - $50,000) / 5 years = $70,000.

$70,000

An oil well costs $500,000 and is estimated to hold 100,000 barrels of oil. There is no residual value. If 15,000 barrels are extracted and sold during the year, what is the depletion expense? Depletion expense is calculated using the units-of-production method, which allocates depletion based on the usage of the natural asset. The first step is calculating depletion per unit by dividing the cost less residual value by the useful life in units. In this problem, we calculate ($500,000 - $0) / 100,000 barrels = $5 per barrel as the depletion rate. This amount is multiplied by the actual usage for the year, giving us 15,000 barrels * $5 per barrel depletion rate = $75,000 for depletion expense.

$75,000

A piece of equipment costs $100,000 and has $5,000 of depreciation expense each year using the straight-line method. What is the book value at the end of the third year? After 3 years, accumulated depreciation would be ($5,000 * 3 years) = $15,000. Book value is calculated by taking the cost of $100,000 - $15,000 accumulated depreciation = $85,000.

$85,000

Lake Company reported beginning and ending Total Assets of $25,000 and $35,000 respectively. The Net Sales for the year were $15,000. What is the asset turnover ratio? The asset turnover ratio is calculated by dividing net sales by average total assets, or 15,000 / ((25,000 + 35,000)/2) = 0.50.

0.50

A piece of equipment was purchased two years ago for $50,000 and now has accumulated depreciation of $46,000. Suppose the piece of equipment was sold for $1,000. What is the result of this disposal transaction? The book value at the time of the sale is ($50,000 - $46,000) = $4,000. It sold for $1,000 which is $3,000 below book value, so there would be a $3,000 loss.

3,000 loss

Which cost is not recorded as part of the cost of a new building?

Cost of clearing the land and removing an unwanted building

What would be the journal entry to record $3,000 in depletion expense for the year?

Depletion Expense - of Resources 3,000 - DR Accumulated Depletion - of Resources 3,000 - CR

A piece of equipment was purchased two years ago for $50,000 and now has accumulated depreciation of $40,000. Suppose the piece of equipment was sold for $11,000. What is the result of this disposal transaction?

Gain of $1,000

A piece of equipment was purchased two years ago for $50,000 and now has accumulated depreciation of $40,000. Suppose the piece of equipment was sold for $11,000. What is the result of this disposal transaction? The book value at the time of the sale is ($50,000 - $40,000) = $10,000. It sold for $11,000 which is $1,000 above book value, so there would be a $1,000 gain.

Gain of 1000

The excess of the cost of an acquired company over the sum of the market value of its net assets is ________.

Goodwill

Which cost is not recoded as part of the cost of machinery and equipment?

Maintenance on the machine after it is up and running

An automobile costs $60,000 when new and has accumulated depreciation of $35,000. Suppose the automobile is exchanged for a new automobile. The new automobile has a market value of $70,000 and we pay $45,000 in cash. Assume the exchange has commercial substance. What is the result of this exchange?

No Gain or Loss

Which depreciation method always gives you the same amount of depreciation expense each year?

Straight-line

Which cost is not recoded as part of the cost of land?

Building permits

Which of the following is not an intangible asset?

Cash

Suppose a piece of equipment cost $35,000 and has accumulated depreciation of $10,000. It is sold for $15,000 cash. What is the journal entry to record the sale of the equipment? At the time of the sale, the book value of the equipment is its cost less accumulated depreciation or $35,000 - $10,000 = $25,000. If the equipment is sold for $15,000, there is a loss of $15,000 - $25,000 = ($10,000). To record the sale of this asset, you would debit Cash for $15,000, debit Accumulated Depreciation for $10,000 (to zero the account) and debit Loss on Disposal for $10,000. You would credit Equipment for $35,000 (to zero the account).

Cash 15,000 - DR Accumulated Depreciation 10,000 - DR Loss on Disposal 10,000 - DR Equipment 35,000 - CR

Suppose an automobile cost $30,000 and has accumulated depreciation of $8,000. It is sold for $25,000 cash. What is the journal entry to record the sale of the automobile?

Cash 25,000 - DR Accumulated Depreciation 8,000 - DR Automobile 30,000 - CR Gain on Disposal 3,000 - CR