Reference no: EM132550958

Questions -

Q1. Art Modell Company reported $61,000 in depreciation expense for the current year using the double-declining balance method. The company estimates that it saved net cash of $12,000 in income taxes by using the double-declining-balance instead of the straight-line method. The company has a 30% tax rate. What would depreciation expense have been using the straight-line method?

A. $43,857

B. $40,000

C. $21,000

D. $7,200

Q2. Paul's Lodging Corporation purchased equipment on January 1, 20X6 for $180,000. The equipment had an estimated useful life of 10 years and an estimated residual value of $30,000. After using the equipment for 3 years, the company determined that the equipment could be used for an additional 9 years and have a residual value of $9,000. Assuming Paul's Lodging Corporation uses straight-line depreciation, compute depreciation expense for the year ending December 31, 20X9.

A. $11,250

B. $13,500

C. $15,000

D. $14,000

Q3. Jackson Corporation acquired equipment on January 1, 20X6, for $320,000. The equipment had an estimated useful life of 10 years and an estimated salvage value of $25,000. On January 1, 20X9, Jackson Corporation revised the total useful life of the equipment to 6 years and the estimated salvage value to be $20,000. What is the book value as of December 31, 20X9?

A. $161,000

B. $159,000

C. $154,333

D. $146,000

Q4. If an asset is scrapped before being fully depreciated:

A. the company will incur a loss on the disposal.

B. the equipment account will be credited.

C. the accumulated depreciation account will be debited.

D. all of the above will occur.

Q5. If a machine has been fully depreciated and has no residual value:

A. there will always be a loss on the disposal.

B. there will always be a gain on the disposal.

C. there will be no gain or loss on the disposal.

D. total assets will be increased.

Q6. Patch Company sold some office furniture for $4,800 cash. The furniture cost $31,500 and had accumulated depreciation through the date of sale totaling $29,300. The journal entry to record the sale of the furniture will include a:

A. debit to Loss on Sale of Furniture for $26,700.

B. debit to Gain on Sale of Furniture for $2,600.

C. credit to Gain on Sale of Furniture for $2,600.

D. credit to Loss on Sale of Furniture for $26,700.

Q7. Smucker's Company sold equipment costing $65,000 with $60,000 of accumulated depreciation for $10,000 cash. The company's journal entry to record this sale will NOT include a:

A. credit to Equipment for $65,000.

B. credit to Gain on Sale of Equipment for $5,000.

C. debit to Accumulated Depreciation for $60,000.

D. debit to Gain on Sale of Equipment for $5,000.

Q8. Equipment costing $47,500 with a book value of $22,500 is sold for $26,000. The journal entry will involve a ___________ to Accumulated Depreciation.

A. credit of $25,000

B. debit of $22,500

C. debit of $25,000

D. credit of $22,500

Q9. Equipment purchased for $85,000 on January 1, 20X6, was sold on July 1, 20X9. The company uses the straight-line method of computing depreciation and recognizes $17,000 of depreciation expense annually. When recording the sale, the company should record a debit to Accumulated Depreciation for:

A. $51,000.

B. $59,500.

C. $68,000.

D. nothing; Accumulated Depreciation is not debited.

Q10. Equipment acquired on January 1, 20X6, is sold on June 30, 20X9, for $11,200. The equipment cost $26,800, had an estimated residual value of $6,800, and an estimated useful life of 5 years. The company prepared financial statements on December 31, and the equipment has been depreciated using the straight-line method. Prior to determining the gain or loss on the sale of this equipment, the company should record depreciation of:

A. $2,000.

B. $5,000.

C. $31,700.

D. nothing; no entry is required.