Accounting #13 chapter 8 study (exam 4)

Arc Co. purchased a piece of equipment for $25,000. At the end of the year, the book value of the equipment is $12,000. The salvage value is 0. How much is accumulated depreciation at the end of the period? Multiple choice question. a. $25,000 b. $13,000 c. $37,000 d. $12,000

( b. 25,000 -12,000)

Ring Co. owns a delivery van that was purchased two years ago for $25,000. Ring has depreciated the van for two years at a straight-line amount of $4,000 per year. The book value of this van at the end of the second year would be $________

17,000; ( book value is cost - accumulated depreciation= 25,000 - 8000 (4000*2 bc it is the second yr and straight line has the same amount for each year so you add the total of years needed))

On January 1, Enco Co. purchases a milling machine for $15,000. The machine is expected to last seven years and have a salvage value of $1,000. Assuming the company uses the straight-line method, depreciation expense should be $ ________ per year.

2000 (straight line = cost (15,000) - salvage value (1000) / useful life (7 years))

Nimo Co. purchased a machine for $12,000 and estimates it will use the machine for five-years with a $2,000 salvage value. Using the double declining-balance depreciation method, compute the machine's first year depreciation expense.

4800; (100%/ useful life (5 years) * 2 = 40 %. 40% * cost (12,000) = 4800)

Geo Co. purchased a building for $400,000. In addition, Geo paid $35,000 closing fees (including title and lawyer fees). Geo also paid $60,000 to modify the building, changing the layout specifically for Geo's needs. Geo should record the building at $_______

495000 (400,000 + 35,000 + 60,000)

At the beginning of the year, Jobs Co. owned one piece of office equipment, a copier. The copier was purchased two years ago for $12,000. At the beginning of the year, the balance in accumulated depreciation was $4,000. Jobs uses straight-line depreciation of $2,000 per year with a zero salvage value. How much is accumulated depreciation at the end of the year?

6,000 ( 2,000 + 4,000)

On January 1, Bora Co. purchased a delivery van for $22,000. Bora expects to drive the van for approximately 5 years or 100,000 miles, before disposing of it for an estimated salvage value of $2,000. During the first year, Bora drives the van for 18,000 miles. How much would depreciation expense be if Bora uses the units-of-production depreciation method? Multiple choice question. a. $3,600 b. $3,960 c. $4,400 d. $4,000

a. (units= cost (22,000) - salvage value (2,000) / total units (100,000) * units (18,000))

Book value can be calculated by taking an asset's acquisition costs less its ___________ ________________.

accumulated depreciation

Select all that apply Which of the following items are plant assets? (Check all that apply.) Multiple select question. a. Equipment with no value b. Equipment being used in operations c. Building being used for operations d. Land held for investment

b,c

Select all that apply Which of the following factors determine depreciation? (Check all that apply.) Multiple select question. a. Appraisal of asset b. Salvage value c. Useful life d/ Current market value of asset e. Book value f. Cost of asset

b,c,f

Consistent with the ________ principle, plant assets should be recorded at cost, which includes all the normal and reasonable expenditures necessary to get the asset in place and ready for its intended use. Multiple choice question. a. plant asset b cost c. monetary unit d. full disclosure

b.

Straight-line depreciation can be calculated by taking: Multiple choice question. a. (cost plus salvage value)/productive life b. (cost minus salvage value)/useful life c. (cost minus salvage value)/productive life d. (cost plus salvage value)/useful life

b.

Which of the following items related to depreciating equipment would be found on a company's income statement? Multiple choice question. a. Accumulated Depreciation - Equipment b. Depreciation Expense - Equipment c. Equipment d. Net Book Value

b.

PT Co. purchased land and an existing building for $200,000. In addition, PT paid closing costs of $15,000. PT removed the building and regraded the land for a total cost of $35,000. PT should record the cost of the land for: Multiple choice question. a. $215,000 b. $250,000 c. $235,000 d. $200,000

b. (200,000 + 15,000 + 35,000)

Juno Co. purchased a machine for $10,000 and estimates it will use the machine for four years with a $2,000 salvage value. Using the double declining-balance depreciation method, compute the machine's first year depreciation expense. Multiple choice question. a. $4,000 b. $5,000 c. $2,500 d. $2,000

b. (DDB= (100%/ useful life (4 years) *2= 50% 100,000 * 50% = 5,000).

On January 3, ATA Company purchases a copy machine for $11,500. The machine is expected to last five years and have a salvage value of $1,500. Compute depreciation expense for the first year, assuming the company uses the straight-line method. Multiple choice question. a. $2,300 b. $2,000 c. $2,600

b. straight line = cost (11,500) - salvage value( 1,500) / useful life (5 years)

A(n) _________ is a permanent decline in the market value of an asset relative to its book value. Multiple choice question. a. betterment b. obsolescence c. inadequacy d. impairment

c.

______ is the process of allocating the cost of a plant asset to expense in the accounting periods benefiting from its use. Multiple choice question. a. Depletion b./ Allocation c. Depreciation d. Amortization

c.

On June 1, Harding Co. purchased a machine for $14,000 and estimates it will use the machine for five years with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine's first year (partial) depreciation expense for June 1st through December 31st. Multiple choice question. a. $2,400 b. $1,000 c. $1,400 d. $2,800 e. $1,200

c. ( partial depreciation calculates the months = cost (14,000) - salvage value (2,000) / useful life (5 years) * 7 months/12 months = 1400) 7 months because june 1 thru dec 31 is 7 months.

Accumulated depreciation is a ________ asset account (one that is linked with the plant asset account, but has an opposite normal balance) and is reported on the balance sheet.

contra

A permanent decline in the fair value of an asset relative to its book value is called asset ____________(impairment/ obsolescene)

impairment

Land _________ are assets that increase the benefits of land, have a limited useful life, and are depreciated—such as walkways and fences.

improvements

_____________ assets are assets used in a company's operations that have a useful life of more than one accounting period.

plant

________ value, also called residual value or scrap value, is an estimate of the asset's value at the end of its benefit period.

salvage

True or false: The cost of a plant asset consists of all necessary and reasonable expenditures to acquire it and prepare it for its intended use.

true

Wen Co. purchased a building for $200,000. Wen paid $20,000 in lawyer and title fees. Wen also paid an additional $15,000 to modify the building in order to accommodate his business needs. Wen should record the cost of the building at: Multiple choice question. $200,000 $220,000 $235,000 $215,000

235,000 ; (200,000 +20,000 +15,000)

On October 30, Cleo Co. purchased a machine for $26,000 and estimates it will use the machine for four years with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine's first year partial depreciation expense for October 30 through December 31. Multiple choice question. A. $6,000 B. $1,000 C. $3,000 D. $1,500

B. ( partial depreciation factors in months = cost (26,000) - salvage value (2000) / useful life (4 years) * 2 months/ 12 months= 1000) 2 months because oct 20 to dec 31 is two months.

Grand Co. owns one copier that was purchased for $10,000 three years ago. The depreciation expense taken on the copier each year has been $2,700; $1,800; and $2,200, based on the number of copies that have been made on the copier. Based on this information, the company uses the ________ depreciation method. Multiple choice question. a. units-of-production b. declining-balance c. straight-line d. MACRS

a.

The method of depreciation that charges a varying amount to depreciation expense for each period of an asset's useful life depending on its usage is called the _________ method. Multiple choice question. a. straight-line b. units-of-production c.MACRS d. declining-balance

b.

On June 1, Harding Co. purchased a machine for $14,000 and estimates it will use the machine for five years with a $2,000 salvage value. Using the straight-line depreciation method, compute the machine's first year (partial) depreciation expense for June 1st through December 31st. Multiple choice question. a. $1,000 b. $2,800 c. $1,400 d. $2,400 e. $1,200

c. (partial depreciation factors in months= cost (14,000 ) - salvage value (2,000) / useful life (5 years) * 7 months/ 12 months) 7 months bc june 1 thru dec 31 is 7 months.

Digg Co. installs a manufacturing machine in its factory at the beginning of the year at a cost of $36,000. The machine's useful life is estimated at 10 years, or 300,000 units of product, with a $6,000 salvage value. During its first year, the machine produces 14,000 units of product. Determine the machine's first year depreciation expense under the units-of-production method. Multiple choice question. a. $1,680 b. $3,000 c. $1,400 d. $3,600

c. (units = cost (36,000) - salvage value (6000) / total units (300,000) * units of production (14,000)

The asset's acquisition costs less its accumulated depreciation is called: Multiple choice question. a. market value b. resale value c. accumulated deprecation d. book value

d

Accumulated depreciation is recorded on which of the following financial statements? Multiple choice question. a. Statement of cash flows b. Statement of retained earnings c. Income statement d. Balance sheet

d.

The factors necessary to compute depreciation include all of the following, except: Multiple choice question. a. useful life. b. cost. c. salvage value. d. book value.

d.

The term ______ refers to a plant asset that is in process of becoming outdated and no longer used. Multiple choice question. a. salvage b. inadequacy c. scrap d. obsolescence

d.

Select all that apply The cost at which a company records purchases of machinery and equipment should include which of the following? (Check all that apply.) Multiple select question. a. Purchase price b. Taxes c. Installation d. Operating costs e. Shipping fees

a,b,c,e

Select all that apply Plant assets should be recorded at cost, including all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use. This would include which of the following costs? (Check all that apply.) Multiple select question. a. Assembling b. Testing c. Repairs necessary for damages incurred during installation d. Shipping charges e. Fines incurred for failing to get the correct permits

a,b,d

Select all that apply The cost of a plant asset includes the following: (Check all that apply). Multiple select question. a. Cost to prepare it for use b. Depreciation expense c. Purchase price d. Disposal cost

a,c

Assets that increase the benefits of land, have a limited useful life, and are depreciated—such as parking lots and street lights—are called: Multiple choice question. a. land improvements. b land additions. c. land. d. land structures.

a.

Depreciation Expense is reported on which of the following financial statements? Multiple choice question. a. Income statement b. Statement of cash flows c. Balance sheet d. Statement of retained earnings

a.

The inability of a company's plant assets to meet its demands is called: Multiple choice question. a. inadequacy b. salvage c. scrap d. obsolescence

a.