Question 1

A truck costs $300,000 and is expected to run 100,000 miles during its 5-year life.Residual value is expected to be zero because the truck was used when acquired.If the truck runs 24,000 miles the first year,how much depreciation should the corporation record under the units-of-production method?

Accepted Answer

Under the units-of-production method, depreciation is calculated based on the number of units produced or miles driven. To calculate the depreciation for the first year, we need to determine what percentage of the truck's total expected miles were used in the first year.

24,000 miles / 100,000 miles = 0.24 or 24% of the total expected miles were used in the first year.

To calculate the depreciation expense, we multiply this percentage by the truck's cost, and then divide by the number of years it is expected to be in service.

Depreciation expense = (24% x $300,000) / 5 years = $72,000

Therefore, the correct answer is C.

Question 2

Trimer Corp sold a truck for $15,000 cash.It was originally purchased for $50,000 and had accumulated depreciation of $30,000 at the time of sale.Give the journal entry for the sale of truck.

Accepted Answer

The answer of Trimer Corp sold a truck for $15,000...

Question 3

Equipment was purchased for $24,000.The equipment's estimated useful life was 5 years,and its residual value was $4,000.The straight-line method of depreciation was used.Give journal entry to record the sale of the equipment if it is sold for $25,000 at the end of the first year.

Accepted Answer

The answer of Equipment was purchased for $24,000.The equipment's estimated...

Question 4

A plant asset is said to be fully depreciated when the book value is ________.

Accepted Answer

When a plant asset is fully depreciated, the book value will equal the residual value, which is the estimated value of the asset at the end of its useful life. The market value of the asset may be different from its book value or residual value, but it is not relevant in determining whether the asset is fully depreciated. Therefore, options A and B are incorrect. Option D is also incorrect because the market value of the asset may fluctuate depending on market conditions, but it is not used to determine whether the asset is fully depreciated.

Question 5

On June 30,2015,Adilide Inc.discarded equipment costing $40,000.Accumulated Depreciation as of December 31,2014,was $25,000.Assume annual depreciation on the equipment is $2,500.Journalize the partial year depreciation expense and disposal of the equipment.

Accepted Answer

The answer of On June 30,2015,Adilide Inc.discarded equipment costing $40,000.Accumulated...

Question 6

A coal mine costs $1,000,000 and is estimated to hold 50,000 tons of coal.There is no residual value.3,000 tons are extracted and sold during the first year of operations.Calculate depletion per unit.

Accepted Answer

The answer of A coal mine costs $1,000,000 and is...

Question 7

Which of the following is an expense resulting from the decline in the utility of a natural resource?

Accepted Answer

Depletion refers to the reduction in the quantity or quality of a natural resource. This reduction results in the circumstance where the natural resource will be less productive in the future, and eventually unsuitable for production. As a result, depletion is a natural resource's expense.

Question 8

Businesses should not deplete natural resources because these do not decrease in value with time.

Accepted Answer

Natural resources are finite and can be depleted over time through overuse and poor management. This can lead to a decrease in value as the availability of certain resources decreases, making them more difficult and expensive to obtain. It is important for businesses to be mindful of their impact on natural resources and work towards sustainable practices to ensure their availability for future generations.

Question 9

Equipment was purchased for $24,000.The equipment's estimated useful life was 5 years,and its residual value was $4,000.The straight-line method of depreciation was used.Calculate gain or loss on sale if the equipment is sold for $18,000 at the end of the first year.Give journal entry to record the sale of equipment at book value.

Accepted Answer

The answer of Equipment was purchased for $24,000.The equipment's estimated...

Question 10

A photocopier costs $95,000 when new and has accumulated depreciation of $88,000.Suppose the corporation junks this machine and receives nothing.What is the result of the disposal transaction?

Accepted Answer

The book value of the photocopier is $7,000 ($95,000 cost - $88,000 accumulated depreciation). Since the corporation receives nothing for it, the entire book value is a loss.

Question 11

A natural resource is an asset that comes from the earth and is consumed.

Accepted Answer

A natural resource is a substance, material or product that occurs naturally and is found within our environment and can be used for economic gain.

Question 12

On January 1,2015,WAX-D purchased equipment for $60,000 cash,expecting it to remain in service for six years.The corporation depreciates the equipment on a straight-line basis,with $2,000 residual value.On April 30,2017,the corporation sold the equipment for $48,000 cash.Record both depreciation expense for 2017 and sale of the equipment on April 30,2017.(Do not round your intermediate calculations.)

Accepted Answer

The answer of On January 1,2015,WAX-D purchased equipment for $60,000...

Question 13

Trimer Corp.junks a truck which was originally purchased for $50,000 and had accumulated depreciation of $30,000.Give journal entry for disposal of truck.

Accepted Answer

The answer of Trimer Corp.junks a truck which was originally...

Question 14

Corel Sales sold its old office furniture for $5,000.Its original cost was $10,000 and at the time of sale,it had accumulated depreciation of $7,000.What was the effect of the transaction?

Accepted Answer

The original cost of the furniture was $10,000 and accumulated depreciation was $7,000. Therefore, the book value or carrying value of the furniture was $3,000 ($10,000 - $7,000). When it was sold for $5,000, Corel Sales made a gain of $2,000 ($5,000 - $3,000).

Question 15

The units-of-production method is used to compute the depletion expense.

Accepted Answer

The units-of-production method is typically used to calculate both depreciation and depletion expense.

Question 16

Prinkle Corporation had purchased equipment for $50,000 on January 1,2015.On December 31,2017,the corporation sold the equipment for $23,000.Accumulated Depreciation as of December 31,2017 was $25,000. Calculate gain or loss on sale.

Accepted Answer

The book value of the equipment on December 31, 2017, can be calculated as follows: 
Cost of Equipment - Accumulated Depreciation = $50,000 - $25,000 = $25,000

Since the selling price is less than the book value, there is a loss on the sale.

Loss on sale = Selling price - Book value = $23,000 - $25,000 = -$2,000

Therefore, the answer is B) $2,000 loss.

Question 17

On June 30,2015,Regal Furniture discarded fully depreciated equipment costing $35,000.Journalize the disposal of the equipment.

Accepted Answer

The answer of On June 30,2015,Regal Furniture discarded fully depreciated...

Question 18

Rightz Petroleum Products owns furniture that was purchased for $20,000.Accumulated depreciation is $16,000.The furniture was sold for $3,800.Give journal entry to record the transaction.

Accepted Answer

The answer of Rightz Petroleum Products owns furniture that was...

Question 19

The process by which businesses spread the allocation of a natural resource's cost over its usage is known as depreciation.

Accepted Answer

The answer of The process by which businesses spread the...

Question 20

The gain or loss on the sale of a plant asset is determined by comparing ________.

Accepted Answer

The gain or loss on the sale of a plant asset is determined by comparing the sale value and book value of the asset. The book value is the difference between the original cost of the asset and its accumulated depreciation. Therefore, comparing sale value and book value will give a clear understanding of the gain or loss on the sale of a plant asset.

Quiz 9: Plant Assets, natural Resources, and Intangibles