Reference no: EM132251447

Questions -

Q1. Johnny Appleseed Inc. recently purchased a fruit picking machine for $88,000 that it uses 100% in production. Transportation cost to bring the machine to the orchards was $6,000. Johnny Appleseed estimates the machine will be useful for six years and that it will be able to pick 900,000 apples. At the end of its life, the machine will have a value of $4,000. During the second year of production, the machine picks 210,000 apples. What is depreciation expense for the second year?

A. $14,000

B. $15,000

C. $19,600

D. $21,000

Q2. Under the Section 179 IRS election, a company may elect to expense up to $500,000 of equipment cost for the year 2012. This does not apply to buildings and there are limits on autos.

A. True

B. False

Q3. Sargent Enterprises has a fixed asset with a useful life of five years. The original cost was $152,000 and the residual value is $22,000. What is the depreciation of the fixed asset for the period June through December assuming the company uses sum-of-the-years'-digits to calculate depreciation and the asset was purchased and put into service June 1? For purposes of calculating the depreciation rate, round to the nearest two decimal points (e.g., 15.10%).

A. $29,556

B. $50,667

C. $25,275

D. $43,333

Q4. Book depreciation is defined by IRS rules, while tax depreciation is defined by GAAP rules.

A. True

B. False

Q5. Cheshire Company has an assembling machine with a useful life of six years. The original cost was $73,000 and the residual value is $8,000. If Cheshire uses double declining balance for its depreciation method, what is depreciation expense in year two, assuming the asset is put in service January 1? For purposes of calculating the depreciation rate, round to the nearest two decimal points (e.g., 15.10%).

A. $21,665

B. $14,443

C. $24,331

D. $16,221

Q6. Under the MACRS depreciation method, the salvage value of the asset to be depreciated is irrelevant to the calculation of depreciation.

A. True

B. False

Q7. Crimson Inc. purchases a weaving machine for $11,000. In addition, it incurs sales tax of $500, shipping costs of $1,000 and $2,000 in labor costs to put the machine in place. Estimated residual value of the machine at the end of its useful life is $750. What is the depreciable base of the machine?

A. $11,000

B. $11,500

C. $13,750

D. $14,500

Q8. On June 1, 2016, On Call Inc. purchases a Mercedes Benz for use in the company business. The cost of the vehicle is $55,000, the useful life is estimated at four years and the residual value is $5,000. What is total depreciation in the first year of the car's purchase, assuming it meets the definition of a passenger vehicle, the applicable MACRS rate is 20%, 50% bonus depreciation is taken and maximum depreciation in Year 1 is $11,160?

A. $11,160

B. $20,000

C. $22,500

D. $23,750

Q9. Arrow Inc. purchases 25 injection molding machines at a total cost of $110,000. The useful life is estimated to be 10 years and the residual value is $7,000. Arrow uses straight-line depreciation. What is Arrow's depreciation in Year Three?

A. $11,000

B. $10,000

C. $10,500

D. $10,300

Q10. A sole proprietorship can deduct 100% of the depreciation related to a company car even when he or she uses the car for personal purposes.

A. True

B. False

Q11. Caligari Worldwide purchases a machine that assembles office desks for $35,000. The machine is used 100% in production. Total estimated units of production over the life of the machine are 100,000 desks. In Year Three, the machine assembles 18,400 desks. What is the journal entry to record this depreciation?

A. DR Depreciation Expense $6,440, CR Accumulated Depreciation $6,440.

B. DR Cost of Goods Sold $6,440, CR Accumulated Depreciation $6,440.

C. DR Work in Process Inventory $6,440, CR Fixed Assets $6,440.

D. DR Work in Process Inventory $6,440, CR Accumulated Depreciation $6,440.

Q12. Magnificent Machinery purchases five forging machines for $123,000, not including sales tax of $2,500. The cost to transport the machines across the country is $10,700. In preparing the machines for use, Magnificent incurs labor cost of $6,000 and material cost of $2,000. The cost of electricity and maintenance in the first year is $23,400. What is the total cost of the machine for depreciation purposes?

Use letters in alphabetical order to select options

A. $123,000

B. $125,500

C. $144,200

D. $167,600