Reference no: EM132493680
Questions -
Q1. Liverpool Inc. purchased machinery for $32,000. The machinery was later sold for $18,000. Liverpool had already recorded depreciation of $16,000 associated with this machinery. The fair value of the machinery at the date of sale was $19,000. What is the amount of Liverpool's gain/loss on disposal?
A.$2,000 gain
B.$2,000 loss
C.$3,000 loss
D.$3,000 gain
E.$18,000 gain
Q2. During 2019, Wolverhampton Wanderers Inc. paid $1 million in cash for ordinary maintenance expenses. It improperly capitalized this amount. As a result of this error:
A. Cash flow from operations is not affected.
B. Net income is understated.
C. Leverage (total liabilities/total assets) is understated.
D. All of the above.
E. None of the above.
Q3. On December 31, 2020, Everton Inc. had a balance in its prepaid insurance account of $48,400. During 2021, $86,200 was paid for insurance. At the end of 2021, after adjusting entries were recorded, the balance in the prepaid insurance account was $42,000. Insurance expense for 2021 was:
A. $6,400
B. $134,400
C. $86,000
D. $92,600
E. $102,000
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