Question 1

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...

Question 2

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 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...

Question 4

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 (the amount for which it is sold) and the book value (the original cost minus accumulated depreciation). Therefore, choice A, which compares sale value and book value, is the correct answer. Choices B, C, and D are incorrect as they do not involve comparing the sale value to the book value.

Question 5

On January 1, 2015, WAX-D purchased equipment for $60,000 cash, expecting it to remain in service for six years. The company depreciates the equipment on a straight-line basis, with $2,000 residual value. On April 30, 2017, the company 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...

Question 6

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 total amount of depreciation ($7,000) is greater than the amount of cash received from the sale ($5,000), resulting in a loss of $2,000. Therefore, the answer is option B - gain of $2,000 is the best choice.

Question 7

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 8

Prinkle Company had purchased equipment for $50,000 on January 1, 2015. On December 31, 2017, the company 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 as of December 31, 2017, was $25,000 ($50,000 - $25,000). Since the equipment was sold for $23,000, the company incurred a loss of $2,000 ($23,000 - $25,000). Therefore, the correct answer is option B, $2,000 loss.

Question 9

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

Accepted Answer

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

Question 10

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

Accepted Answer

This is true. The units-of-production method is one way to calculate depletion expense for natural resources, based on the number of units produced or extracted in a given period.

Question 11

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

Accepted Answer

Depletion refers to the decline in the utility of a natural resource, which can result in expenses such as extraction costs, restoration costs, and exploration costs. Amortization is the systematic allocation of the cost of intangible assets, depreciation is the systematic allocation of the cost of tangible assets, and obsolescence refers to the decrease in value of an asset due to technological advancements or changes in market demand.

Question 12

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 13

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

Accepted Answer

The answer of A photocopy machine costs $95,000 when new...

Question 14

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

Accepted Answer

A plant asset is fully depreciated when its book value is equal to its residual value. At this point, the asset has been depreciated for its entire useful life and has no remaining value to be depreciated.

Question 15

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...

Question 16

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...

Question 17

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

Accepted Answer

Natural resources do decrease in value over time if they are not sustainably managed. Overuse and exploitation can lead to depletion and irreversible damage to the environment, which ultimately affects the economic viability of businesses. It is important for businesses to adopt sustainable practices that conserve and regenerate natural resources for future use.

Question 18

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

Accepted Answer

Natural resources are renewable or non-renewable materials or substances that come from the earth and are used by humans for their benefit or consumption. Examples of natural resources include air, water, timber, minerals, and fossil fuels.

Question 19

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 company record under the units-of-production method?

Accepted Answer

Under the units-of-production method, depreciation is based on the actual usage of the asset. To calculate depreciation, we need to determine the depreciation per unit of production.

Depreciation per unit of production = (Cost of asset - Residual value) / Total expected units of production

= ($300,000 - $0) / 100,000 miles

= $3 per mile

Depreciation for the first year = Depreciation per unit of production * Actual units produced

= $3 per mile * 24,000 miles

= $72,000

Therefore, the company should record $72,000 of depreciation under the units-of-production method. Option C is the correct answer.

Question 20

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...

Quiz 10: Plant Assets, Natural Resources, and Intangibles