Question 1

Avatar,Inc.bought a machine on January 1,2011 for $96,000.The machine is expected to last for 8 years,after which it will be worthless.How much depreciation expense will Avatar show on its income statement for the year ended December 31,2011?

Accepted Answer

The depreciation expense for the first year can be calculated using the straight-line method:
Depreciation expense = (Cost of the machine - Salvage value) / Useful life
Depreciation expense = ($96,000 - $0) / 8 = $12,000 
Therefore, the correct answer is C) $12,000.

Question 2

Enoch,Inc.began operations on July 1,2011.On August 1,it received $12,000 in advance for services to be performed evenly over the next 12 months.How much unearned revenue should the company report on its balance sheet at August 31,2011?

Accepted Answer

The company received $12,000 in advance for services to be performed evenly over the next 12 months, which means they earned 1/12th of that revenue for the month of July. Therefore, the amount of unearned revenue that they should report on their balance sheet at August 31, 2011 is $11,000 (12,000 - 1,000).

Question 3

Avatar,Inc.bought a machine on January 1,2011 for $96,000.The machine is expected to last for 8 years,after which it will be worthless.How much depreciation expense will Avatar show on its income statement for the year ended December 31,2012?

Accepted Answer

The machine depreciates evenly over its 8-year life, so the annual depreciation is $96,000 / 8 = $12,000. For the year ended December 31, 2012, the depreciation expense is $12,000.

Question 4

Maxine,Inc.bought a machine on January 1,2012 for $48,000.The machine is expected to last for 8 years,after which it will be worthless.How much depreciation expense will Maxine show on its balance sheet at December 31,2012?

Accepted Answer

Depreciation expense is reported on the income statement, not the balance sheet. The accumulated depreciation, however, would appear on the balance sheet.

Question 5

Maxine,Inc.bought a machine on January 1,2012 for $48,000.The machine is expected to last for 8 years,after which it will be worthless.How much accumulated depreciation will Maxine report at December 31,2012?

Accepted Answer

The machine has only been owned for 1 year out of its expected 8-year useful life, so the accumulated depreciation for the first year will be the cost of the machine divided by its expected useful life, which is $48,000/8 = $6,000. Therefore, the accumulated depreciation that Maxine will report at December 31, 2012 is $6,000.

Question 6

Maxine,Inc.bought a machine on January 1,2010 for $24,000.The machine is expected to last for 8 years,after which it will be worthless.How much accumulated depreciation will Maxine report at December 31,2011?

Accepted Answer

To calculate accumulated depreciation, we need to know the annual depreciation expense first. The machine was bought for $24,000 and is expected to last for 8 years, so the annual depreciation expense is:

$24,000 / 8 years = $3,000 per year

Now, we need to calculate the accumulated depreciation for 2 years (2010 and 2011). The formula to calculate accumulated depreciation is:

Accumulated Depreciation = Depreciation Expense x Number of Years

Accumulated Depreciation = $3,000 x 2 years = $6,000

Therefore, Maxine will report accumulated depreciation of $6,000 at December 31, 2011. Option D is correct.

Question 7

Maxine,Inc.bought a machine on January 1,2012 for $48,000.The machine is expected to last for 8 years,after which it will be worthless.How much depreciation expense will Maxine show on its income statement for the year ended December 31,2013?

Accepted Answer

The machine's cost is $48,000 and it has a useful life of 8 years. Using straight-line depreciation, the annual depreciation expense is $48,000 / 8 = $6,000.

Question 8

Avatar,Inc.bought a machine on January 1,2011 for $96,000.The machine is expected to last for 8 years,after which it will be worthless.What is the book value of the machine on Avatar's balance sheet at December 31,2012?

Accepted Answer

The book value of an asset is its original cost minus accumulated depreciation. Depreciation is calculated by dividing the cost of the asset by its estimated useful life.

Annual depreciation = Cost of asset / useful life = $96,000 / 8 years = $12,000/year

Accumulated depreciation as of December 31, 2012 (2 years after the purchase) = 2 years x $12,000/year = $24,000

Book value = Cost of asset - Accumulated depreciation = $96,000 - $24,000 = $72,000

Question 9

Maxine,Inc.bought a machine on January 1,2012 for $48,000.The machine is expected to last for 8 years,after which it will be worthless.How much depreciation expense will Maxine show on its income statement for the year ended December 31,2012?

Accepted Answer

To calculate the annual depreciation expense, we use the straight-line depreciation method:
Depreciation expense per year = (Cost of the asset - Salvage value) / Useful life
Salvage value is the expected value of the asset at the end of its useful life. In this case, it is zero because the machine will be worthless. So:
Depreciation expense per year = ($48,000 - $0) / 8 = $6,000
Therefore, Maxine will show a depreciation expense of $6,000 on its income statement for the year ended December 31, 2012.

Question 10

Enoch,Inc.began operations on July 1,2011.On August 1,it received $12,000 in advance for services to be performed evenly over the next 12 months.How much of this revenue should the company report on its income statement for the MONTH ended August 31,2011?

Accepted Answer

The company should recognize 1/12th of the revenue for the month of August since it is to be performed evenly over the next 12 months. Therefore, the revenue recognized for the month of August is $1,000 (12,000/12).

Question 11

Avatar,Inc.bought a machine on January 1,2011 for $96,000.The machine is expected to last for 8 years,after which it will be worthless.How much depreciation expense will Avatar show on its balance sheet at December 31,2011?

Accepted Answer

The answer of Avatar,Inc.bought a machine on January 1,2011 for...

Question 12

Avatar,Inc.bought a machine on January 1,2011 for $96,000.The machine is expected to last for 8 years,after which it will be worthless.How much accumulated depreciation will Avatar report at December 31,2012?

Accepted Answer

The straight-line depreciation method would be used to calculate the depreciation per year, which is calculated as (cost of the asset - salvage value) / useful life. 
Depreciation per year = ($96,000 - $0) / 8 years = $12,000 per year 
To find the accumulated depreciation for 2012, we need to calculate the depreciation expense for 2011 and 2012 and add them together. 
Depreciation expense for 2011 = $12,000 
Depreciation expense for 2012 = $12,000 
Accumulated depreciation for 2012 = Depreciation expense for 2011 + Depreciation expense for 2012 = $12,000 + $12,000 = $24,000. 
Therefore, Choice D ($24,000) is the correct answer.

Question 13

Sure Enuf,Inc.paid $4,800 on May 1,2012 for 12 months' insurance coverage starting May 1.How much insurance expense should appear on the company's income statement for the year ended December 31,2012?

Accepted Answer

The insurance coverage is for 12 months starting from May 1, 2012, which means it will end on April 30, 2013. Since the question is asking for the insurance expense for the year ended on December 31, 2012, we need to calculate the portion of insurance that was used during this period. From May 1, 2012, to December 31, 2012, there are 8 months. Thus, the insurance expense for this period would be 8/12 x $4,800 = $3,200. Therefore, the correct answer is C.

Question 14

Avatar,Inc.bought a machine on January 1,2011 for $96,000.The machine is expected to last for 8 years,after which it will be worthless.How much accumulated depreciation will Avatar report at December 31,2011?

Accepted Answer

In the first year of the machine's use, Avatar can depreciate it for one full year. Using straight-line depreciation, the annual depreciation expense would be $12,000 ($96,000 ÷ 8 years). Therefore, at December 31, 2011, Avatar would have accumulated $12,000 of depreciation expense.

Question 15

Maxine,Inc.bought a machine on January 1,2012 for $48,000.The machine is expected to last for 8 years,after which it will be worthless.What is the book value of the machine on Maxine's balance sheet at December 31,2013?

Accepted Answer

To calculate the book value of the machine we need to use straight line depreciation method, which is calculated as follows:

Cost of the asset - Residual value / Useful life

$48,000 - $0 / 8 years = $6,000 per year

For 2012, Maxine, Inc. would have depreciated the asset for half a year since it was purchased on January 1. Thus, the depreciation expense for 2012 would be:

$6,000 / 2 = $3,000

For 2013, the full year depreciation expense would be:

$6,000

Therefore, the accumulated depreciation for the machine after two years would be:

$3,000 + $6,000 = $9,000

To calculate the book value of the machine, we need to subtract the accumulated depreciation from the cost of the asset:

$48,000 - $9,000 = $39,000

Therefore, the book value of the machine on Maxine's balance sheet at December 31, 2013 would be $39,000.

However, none of the answer choices match this answer. The closest answer is C) $36,000, which is the result of subtracting the full depreciation expense for 2012 and 2013 ($6,000 + $6,000 = $12,000) from the original cost of the asset:

$48,000 - $12,000 = $36,000.

While this would not be the correct book value, it is the closest answer choice provided, so the best choice would be C) $36,000.

Question 16

Sure Enuf,Inc.paid $4,800 on May 1,2012 for 12 months' insurance coverage starting May 1.How much insurance expense should appear on the company's balance sheet at December 31,2012?

Accepted Answer

Insurance expense is reported on the income statement, not the balance sheet. The balance sheet would show any prepaid insurance as an asset, not an expense.

Question 17

Sure Enuf,Inc.paid $4,800 on May 1,2012 for 12 months' insurance coverage starting May 1.How much prepaid insurance should appear on the company's balance sheet at December 31,2012?

Accepted Answer

The insurance coverage started on May 1, 2012, and the balance sheet is for December 31, 2012. So, 8 months of insurance coverage have been used up, and 4 months remain. The prepaid insurance should be 4/12 of the total insurance cost, which is $1,600.

Question 18

On January 1,2011,We Haul,Inc.bought a $48,000 truck,which has no residual value and an expected life of 6 years.How much accumulated depreciation should the company report at December 31,2012?

Accepted Answer

The answer of On January 1,2011,We Haul,Inc.bought a $48,000 truck,which...

Question 19

On January 1,2010,We Haul,Inc.bought a $48,000 truck,which has no residual value and an expected life of 6 years.How much accumulated depreciation should the company report at December 31,2012?

Accepted Answer

The answer of On January 1,2010,We Haul,Inc.bought a $48,000 truck,which...

Question 20

Sure Safe,Inc.had prepaid insurance of $1,600 on January 1,2011 from a 12-month insurance policy purchased on March 1,2010 for $9,600.On March 1,2011,the company bought more insurance coverage by paying $10,800 for a new one-year policy.The company's year ends on December 31,2011 and all adjustments for the whole year are made on that date.What amount should appear on the December 31,2011 balance sheet as prepaid insurance? What amount of insurance expense should be reported on the income statement for the year ended December 31,2011?

Accepted Answer

The answer of Sure Safe,Inc.had prepaid insurance of $1,600 on...

Quiz 3: Accruals and Deferrals: Timing Is Everything in Accounting