acc test 3

Recording depreciation each period is necessary in accordance with the

matching principle

On December 31, 2005, Bertram Company had an outstanding note payable totaling $125,000. The note is due in equal annual installments of $25,000 on January 1 of each of the next 5 years. The current portion of long-term debt that should be reported on the December 31, 2005 balance sheet is

25,000

The interest expense on a $1,000, 4%, 3-month note is

10 1000x.04x3/12

Raptor Company's trial balance at December 31 reports Bonds Payable of $100,000 and Premium on Bonds Payable of $4,500. The bonds will be reported on the balance sheet at a carrying value of

104,500

Equipment was purchased for $60,000. Freight charges amounted to $2,800 and there was a cost of $8,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be

11,760

A corporation issues $300,000, 10%, 5-year bonds on January 1, 2003 for $287,400. Interest is paid semiannually on January 1 and July 1. If the corporation uses the straight-line method of amortization of bond discount, the amount of bond interest expense to be recognized on July 1, 2003 is

16260

A company purchased factory equipment on April 1, 2006 for $48,000. It is estimated that the equipment will have a $6,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2006 is

3,150 calculated as (48,000-6,000)/10. However, the asset was only used for 9 months during 2006 (all of April through the end of December). Therefore, the depreciation expense for 2006 is $3,150 (4200 x 9/12).

A company purchased factory equipment for $150,000. It is estimated that the equipment will have a $15,000 salvage value at the end of its estimated 5-year useful life. If the company uses the double-declining-balance method of depreciation, the amount of annual depreciation recorded for the second year after purchase would be

3,600

A factory machine was purchased for $60,000 on January 1, 2006. It was estimated that it would have a $12,000 salvage value at the end of its 5-year useful life. It was also estimated that the machine would be run 40,000 hours in the 5 years. The company ran the machine for 4,000 actual hours in 2006. If the company uses the units-of-activity method of depreciation, the amount of depreciation expense for 2006 would be

4,800

A company purchased office equipment for $20,000 and estimated a salvage value of $4,000 at the end of its 5-year useful life. The constant percentage to be applied against book value each year if the double-declining-balance method is used is

40%

Renn Company acquires land for $56,000 cash. Additional costs are as follows: Removal of shed $ 300 Filling and grading 1,500 Salvage value of lumber of shed 120 Broker commission 1,130 Paving of parking lot 10,000 Closing costs 560 Renn will record the acquisition cost of the land as

59,370

Chase County Bank agrees to lend Agler Brick Company $300,000 on January 1. Agler Brick Company signs a $300,000, 8%, 9-month note. What is the adjusting entry required if Agler Brick Company prepares financial statements on June 30?

Correct Debit Interest Expense, credit Interest Payable, $12,000

The balance in the Accumulated Depreciation account represents the

Correct amount charged to expense since the acquisition of the plant asset

The interest expense recorded on an interest payment date is increased

Correct by the amortization of discount on bonds payable.

Craddock Company issued 6%, 10-year bonds with a face amount of $1,000,000 for $1,020,000. The bonds pay interest semi-annually. The annual straight-line amortization of premium on bonds payable will

Correct decrease interest expense by $2,000.

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

Correct is used for tax purposes

The cost of land does not include

annual property taxes.

If the market rate of interest is 7% and the stated rate of interest is 6.5%, bonds will sell

at a discount

Sales taxes collected by a retailer are recorded by

creating sales tax payable

The sale of bonds above face value

will cause the total cost of borrowing to be less than the bond interest paid.