# Question 1.1 equipment costing \$40,000 with a salvage value of

Question 1.1  Equipment costing \$40,000 with a salvage value of \$8,000 and an estimated life of 8 years has been depreciated using the straight-line method for 2 years. Assuming a revised estimated total life of 5 years and no change in the salvage value, the depreciation expense for year 3 would be (Points : 2)

\$4,800.

\$10,667.

\$8,000.

\$6,400.

Question 2. 2. Farr Company purchased a new van for floral deliveries on January 1, 2012. The van cost \$48,000 with an estimated life of 5 years and \$12,000 salvage value at the end of its useful life. The double-declining-balance method of depreciation will be used. What is the balance of the Accumulated Depreciation account at the end of 2013? (Points : 2)

\$7,680

\$23,040

\$30,720

\$11,520

Question 3. 3. Equipment was purchased for \$150,000. Freight charges amounted to \$7,000 and there was a cost of \$20,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a \$30,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be (Points : 2)

\$35,400.

\$29,400.

\$24,600.

\$24,000.

Question 4. 4. A company purchased office equipment for \$40,000 and estimated a salvage value of \$8,000 at the end of its 4-year useful life. The constant percentage to be applied against book value each year if the double-declining-balance method is used is (Points : 2)

20%.

25%.

50%.

5%.

Question 5. 5. Depreciation is the process of allocating the cost of a plant asset over its service life in (Points : 2)

an equal and equitable manner.

an accelerated and accurate manner.

a systematic and rational manner.

a conservative market-based manner.

Question 6. 6. If a plant asset is retired before it is fully depreciated, and no salvage or scrap value is received, (Points : 2)

a gain on disposal will be recorded.

phantom depreciation must be taken as though the asset were still on the books.

a loss on disposal will be recorded.

no gain or loss on disposal will be recorded.

Question 7. 7. On January 1, a machine with a useful life of five years and a residual value of \$25,000 was purchased for \$75,000. What is the depreciation expense for year 2 under the double-declining-balance method of depreciation? (Points : 2)

\$18,000

\$30,000

\$24,000

\$14,400

Question 8. 8. Mattox Company is building a new plant that will take three years to construct. The construction will be financed in part by funds borrowed during the construction period. There are significant architect fees, excavation fees, and building permit fees. Which of the following statements is true? (Points : 2)

Excavation fees are capitalized but building permit fees are not.

Architect fees are capitalized but building permit fees are not.

Interest is capitalized during the construction as part of the cost of the building.

The capitalized cost is equal to the contract price to build the plant less any interest on borrowed funds.

Question 9. 9. A plant asset was purchased on January 1 for \$50,000 with an estimated salvage value of \$10,000 at the end of its useful life. The current year’s Depreciation Expense is \$5,000 calculated on the straight-line basis and the balance of the Accumulated Depreciation account at the end of the year is \$25,000. The remaining useful life of the plant asset is (Points : 2)

10 years.

8 years.

5 years.

3 years.

Question 10. 10. On October 1, 2012, Holt Company places a new asset into service. The cost of the asset is \$80,000 with an estimated 5-year life and \$20,000 salvage value at the end of its useful life. What is the book value of the plant asset on the December 31, 2012, balance sheet assuming that Holt Company uses the double-declining-balance method of depreciation? (Points : 2)

\$52,000

\$60,000

\$72,000

\$76,000

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