Module 12 Assessments

On January 1 of Year 1, Ridgeland Company purchased a machine for $10,000. The machine is expected to have a 10-year useful life and salvage value of $1,000. Assuming that the company uses double-declining-balance depreciation, what is the amount of depreciation expense on this machine for Year 1?

$2,000

On January 1 of Year 1, Merrilton Company purchased a machine for $20,000. The machine is expected to have a 6-year useful life and salvage value of $2,000. The company uses double-declining-balance depreciation. What is the amount of depreciation expense on this machine for Year 2?

$4,444

January 1 of Year 1, Pruhart Company purchased a machine for $20,000. The machine is expected to have a 9-year useful life and salvage value of $2,000. The company uses straight-line depreciation. What is the book value of this machine at the end of Year 6?

$8,000

On January 1 of Year 1, Quiet Flag Industries purchased a machine for $20,000. The machine is expected to have a 5-year useful life and salvage value of $1,000. Assuming that the company uses double-declining-balance depreciation, what is the amount of depreciation expense on this machine for Year 1?

8,000

When a machine is purchased, what is the proper accounting for the costs paid for shipping and installation?

As part of the cost of the machine

What caution needs to be exercised when using a declining-balance depreciation method to compute depreciation expense during the final years of an asset's life?

Cannot reduce book value below salvage value

On January 1 of Year 1, Pruhart Company purchased a machine for $20,000. The machine is expected to have a 10-year useful life and salvage value of $3,000. What is included in the journal entry necessary to record depreciation expense on this machine at the end of Year 1? (Note: the company uses straight-line depreciation.)

Credit to Accumulated Depreciation for $1,700

On January 1 of Year 1, Bullzai Company purchased a machine for $10,000. The machine was expected to have a 10-year useful life and salvage value of $2,000. The company uses straight-line depreciation. At the end of Year 3 (after depreciation expense for the year had been recorded), the machine was sold for $7,000 cash. What is included in the journal entry necessary to record the sale of this machine at the end of Year 3 for $7,000 cash?

Debit to Accumulated Depreciation for $2,400

On January 1 of Year 1, Orange Zest Company purchased a machine for $10,000. The machine was expected to have a 5-year useful life and salvage value of $2,000. The company uses straight-line depreciation. At the end of Year 3 (after depreciation expense for the year had been recorded), the machine was sold for $7,000 cash. What is included in the journal entry necessary to record the sale of this machine at the end of Year 3 for $7,000 cash?

Debit to Accumulated Depreciation for $4,800

On January 1 of Year 1, Corollary Company purchased a machine for $10,000. The machine is expected to have a 10-year useful life and salvage value of $1,000. Assuming that the company uses straight-line depreciation, what is included in the journal entry necessary to record depreciation expense on this machine at the end of Year 1?

Debit to Depreciation Expense for $900

Alliah Company purchased a machine for $10,000. Alliah paid $2,000 cash and signed a note agreeing to pay the remaining $8,000 over the next five years. What is included in the journal entry necessary to record this machine purchase?

Debit to Machine for $10,000

What happens to any remaining undepreciated cost when an asset is scrapped?

It is recorded as a loss.

What number is ignored in the computation of declining-balance depreciation in the first year of the asset's life?

Salvage value

What accounting action is necessary when an asset becomes worthless and must be scrapped?

The cost of asset and accumulated depreciation must be removed from the books.

When land is purchased, what is the proper accounting for the costs paid for commissions, legal fees, and clearing and grading?

They are recorded as part of the cost of the land.

What is the general presumption with respect to accounting for advertising costs?

They should be expensed.

What does it mean to capitalize a cost?

To record it as an asset

When should repair and maintenance costs be capitalized?

When they are expected to benefit future periods