Reference no: EM132546002

Question 1. Jeff's coffee shop purchased equipment for $18,000 on 1 January, 2016. Jeff estimated the useful life to be 3 years with no residual value, and the straight-line method or depreciation will be used. On 1 January, 2017, Jeff decides that the business will use the equipment for a total of 5 more years. What is the revised depreciation expense for 2017? (Year end=December)

a. $2,400

b. $4,500

c. $6,000

d. $3,000

Question 2. Mike Equipment has obtained the following data from its accounting records:

Average cost of PPE assets $850,000

Annual depreciation expense $125,000

Accumulated depreciation $340,000

The average useful life of PPE assets is:

a. 6.8 years

b. Cannot be determined from the data provided

c. 2.5 years

d. 2.72 years

Question 3. The Corporations Act states that a dividend must not be paid by a company:

a. Until it has been operating for a minimum of five years

b. Before the end of a financial year

c. If it would make the company insolvent

d. Unless the company has first obtained the approval of all creditors

Question 4. Companies may find it attractive to issue debt instead of equity because:

a. Interest on debt is always a cheaper form of finance than dividends on shares

b. Interest on debt is not locked in for repayment

c. Interest on debt is tax deductible

d. Interest on debt has to be repaid by the shareholders, not the company.

Question 5. Timeless Ltd produces clocks and sells them with a one-year warranty. The warranty provision account currently has a debit balance of $4,000. The estimated cost of repairing clocks that have already been sold is $18,000. The adjustment needed to update the warranty provision account is:

a. Credit $22,000

b. Credit $18,000

c. Debit $22,000

d. Credit $14,000