16896581
Question 1
Question
Bretman, Inc., purchased a tract of land, a small office building, and some equipment for
$1,800,000. The appraised value of the land was $1,420,000, the building $650,000, and
the equipment $430,000. What is the cost of the land?
Answer
-
$600,000
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$1,022,400
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$1,420,000
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None of the above
Question 2
Question
Which statement is false?
Answer
-
Depreciation is based on the matching principle because it matches the cost of the asset with the revenue generated over the asset’s useful life.
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Depreciation is a process of allocating the cost of a PPE over its useful life.
-
. Depreciation creates a fund to replace the asset at the end of its useful life
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The cost of a PPE minus accumulated depreciation equals the asset’s book value
Question 3
Question
On July 1, 20X6, Amir Communications purchased a new piece of equipment that cost $65,000.
The estimated useful life is 10 years and estimated residual value is $5,000.
3. What is the depreciation expense for 20X6 if Amir uses the straight-line method?
Answer
-
$3,000
-
. $6,000
-
$3,250
-
$6,500
Question 4
Question
On July 1, 20X6, Amir Communications purchased a new piece of equipment that cost $65,000.
The estimated useful life is 10 years and estimated residual value is $5,000.
Assume Amir Communications purchased the equipment on January 1, 20X6. If Amir uses
the straight-line method for depreciation, what is the asset’s book value at the end of 20X7?
Answer
-
$54,000
-
$59,000
-
$48,000
-
$53,000
Question 5
Question
On July 1, 20X6, Amir Communications purchased a new piece of equipment that cost $65,000.
The estimated useful life is 10 years and estimated residual value is $5,000.
Assume Amir Communications purchased the equipment on January 1, 20X6. If Amir uses
the double-declining-balance method, what is the depreciation for 20X7?
Answer
-
$13,000
-
$10,400
-
$12,000
-
. $9,600
Question 6
Question
On July 1, 20X6, Amir Communications purchased a new piece of equipment that cost $65,000.
The estimated useful life is 10 years and estimated residual value is $5,000.
Return to Amir’s original purchase date of July 1, 20X5. Assume that Amir uses the
straight-line method of depreciation and sells the equipment for $44,500 on July 1, 20X9.
The result of the sale of the equipment is a gain (loss) of
Answer
-
$3,500
-
$8,500.
-
$ (15,500).
-
$0
Question 7
Question
. A company bought a new machine for $30,000 on January 1. The machine is expected to
last five years and has a residual value of $6,000. If the company uses the doubledeclining-balance method, accumulated depreciation at the end of year 2 will be
Answer
-
. $12,000
-
$9,600.
-
. $19,200.
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$15,360.
Question 8
Question
Which of the following is not a capital expenditure?
Answer
-
A complete overhaul of an air-conditioning system
-
. Replacement of an old motor with a new one in a piece of equipment
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The cost of installing a piece of equipment
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The addition of a building wing
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A tune-up of a company vehicle
Question 9
Question
Which of the following assets is not subject to a decreasing book value through depreciation, depletion, or amortization?
Answer
-
Goodwill
-
Land improvements
-
. Natural resources
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Intangibles
Question 10
Question
Why would a business select an accelerated method of depreciation for tax purposes?
Answer
-
Accelerated depreciation will result in higher gain on disposal of PPE than straight-line depreciation.
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Accelerated depreciation generates a greater amount of depreciation over the life of the asset than does straight-line depreciation.
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Accelerated depreciation is easier to calculate because salvage value is ignored
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Accelerated depreciation generates higher depreciation expense immediately, and therefore lowers tax payments in the early years of the asset’s life.
Question 11
Question
A company purchased an oil well for $270,000. It estimates that the well contains 100,000
barrels, has an eight-year life, and has no salvage value. If the company extracts and sells
20,000 barrels of oil in the first year, how much depletion expense should be recorded?
Answer
-
$33,750
-
$54,000
-
$27,000
-
$67,500
Question 12
Question
Which item among the following is not an intangible asset?
Answer
-
A copyright
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A patent
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A trademark
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Goodwill
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All of the above are intangible assets.
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