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?
$600,000
$1,022,400
$1,420,000
None of the above
Which statement is false?
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.
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
The cost of a PPE minus accumulated depreciation equals the asset’s book value
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?
$3,000
. $6,000
$3,250
$6,500
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?
$54,000
$59,000
$48,000
$53,000
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?
$13,000
$10,400
$12,000
. $9,600
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
$3,500
$8,500.
$ (15,500).
$0
. 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
. $12,000
$9,600.
. $19,200.
$15,360.
Which of the following is not a capital expenditure?
A complete overhaul of an air-conditioning system
. Replacement of an old motor with a new one in a piece of equipment
The cost of installing a piece of equipment
The addition of a building wing
A tune-up of a company vehicle
Which of the following assets is not subject to a decreasing book value through depreciation, depletion, or amortization?
Goodwill
Land improvements
. Natural resources
Intangibles
Why would a business select an accelerated method of depreciation for tax purposes?
Accelerated depreciation will result in higher gain on disposal of PPE than straight-line depreciation.
Accelerated depreciation generates a greater amount of depreciation over the life of the asset than does straight-line depreciation.
Accelerated depreciation is easier to calculate because salvage value is ignored
Accelerated depreciation generates higher depreciation expense immediately, and therefore lowers tax payments in the early years of the asset’s life.
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?
$33,750
$27,000
$67,500
Which item among the following is not an intangible asset?
A copyright
A patent
A trademark
All of the above are intangible assets.
