Accounting IS 300 Quiz 8

Marlow Company purchased a point of sale system on January 1 for $6,200. This system has a useful life of 4 years and a salvage value of $800. What would be the depreciation expense for the second year of its useful life using the double-declining-balance method?

$1,550.

Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000. The machine's useful life is estimated to be 5 years, or 300,000 units of product, with a $15,000 salvage value. During its first year, the machine produces 64,500 units of product. Determine the machines' first year depreciation under the straight-line method.

$24,000.

Ngu owns equipment that cost $96,500 with accumulated depreciation of $66,000. Ngu asks $35,750 for the equipment but sells the equipment for $33,500. Compute the amount of gain or loss on the sale.

$3,000 gain.

Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. What would be the depreciation expense for the second year of its useful life using the double-declining-balance method?

$544.

Beckman Enterprises purchased a depreciable asset on October 1, Year 1 at a cost of $168,000. The asset is expected to have a salvage value of $16,700 at the end of its five-year useful life. If the asset is depreciated on the double-declining-balance method, the asset's book value on December 31, Year 2 will be:

$90,720

A machine originally had an estimated useful life of 6 years, but after 4 complete years, it was decided that the original estimate of useful life should have been 10 years. At that point the remaining cost to be depreciated should be allocated over the remaining:

6 years.

Additions to land that increase the usefulness of the land such as parking lots, fences, and lighting are not depreciated.

False

Once the estimated depreciation expense for an asset is calculated:

It may be revised based on new information.

A company paid $150,000, plus a 7% commission and $5,000 in closing costs for a property. The property included land appraised at $87,500, land improvements appraised at $35,000, and a building appraised at $52,500. What should be the allocation of this property's costs in the company's accounting records?

Land $82,750; Land Improvements, $33,100; Building, $49,650.

A change in an accounting estimate is:

Reflected in current and future years' financial statements, not in prior statements.

Which of the following is an example of an extraordinary repair?

Replacing the roof on a manufacturing warehouse.

Capital expenditures, also called balance sheet expenditures, are additional costs of plant assets that provide benefits extending beyond the current period.

True

Decision makers and other users of financial statements are especially interested in evaluating a company's ability to use its assets in generating sales.

True

Once an asset's book value equals its salvage value, depreciation stops.

True

Revising an estimate of the useful life or salvage value of a plant asset is referred to as a change in accounting estimate and is reflected in the current, and future financial statements.

True