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Lecture 8 Extra Questions

The document consists of a series of accounting questions related to equipment acquisition, depreciation, and asset disposal. It includes multiple-choice questions that test knowledge on topics such as acquisition costs, periodic depreciation, and journal entries for sales of equipment. Each question provides specific financial scenarios requiring calculations or journal entries to determine gains or losses.

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2 views3 pages

Lecture 8 Extra Questions

The document consists of a series of accounting questions related to equipment acquisition, depreciation, and asset disposal. It includes multiple-choice questions that test knowledge on topics such as acquisition costs, periodic depreciation, and journal entries for sales of equipment. Each question provides specific financial scenarios requiring calculations or journal entries to determine gains or losses.

Uploaded by

chiangkaimin2609
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Lecture 8 Extra Questions

Question 1
Presto Company purchased equipment and these costs were incurred:
Cash price $27,500
Sales taxes 1,800
Insurance during transit 320
Installation and testing 430
Total costs $30,050
Presto will record the acquisition cost of the equipment as
a. $27,500.
b. $29,300.
c. $29,620.
d. $30,050.
___________________________________________________________________
Question 2
Which one of the following items is not a consideration when recording periodic depreciation
expense on plant assets?
a. Residual value
b. Estimated useful life
c. Cash needed to replace the plant asset
d. Cost
________________________________________________________________________
Question 3
A truck was purchased for ¥300,000 and it was estimated to have a ¥60,000 residual value at
the end of its useful life. Monthly depreciation expense of ¥5,000 was recorded using the
straight-line method. The annual depreciation rate is
a. 20%.
b. 2%.
c. 8%.
d. 25%.

Question 4
On July 1, 2020, Hale Kennels sells equipment for $80,000. The equipment originally cost
$300,000, had an estimated 5-year life and an expected residual value of $50,000. The
accumulated depreciation account had a balance of $225,000 on January 1, 2020, using the
straight-line method. The gain or loss on disposal is

1
a. $45,000 gain.
b. $30,000 loss.
c. $45,000 loss.
d. $30,000 gain.
________________________________________________________________
Question 5
Orr Corporation sold equipment for $20,000. The equipment had an original cost of $60,000
and accumulated depreciation of $30,000. As a result of the sale,
a. net income will increase $20,000.
b. net income will increase $10,000.
c. net income will decrease $10,000.
d. net income will decrease $20,000.
___________________________________________________________________
Question 6
If an asset costing 10,000 has a salvage value of 2,000, what is the depreciation expense for
year 5 using the declining balance method at a rate of 20%?
a. 819
b. 3,277
c. 2,000
d. 1,745
___________________________________________________________________________
Question 7
If an asset costing 16,000 is depreciated using the declining balance method at the rate of
40%, what is the net book value of the asset at the end of year 2?
a. 9,600
b. 3,840
c. 5,760
d. 4,860
__________________________________________________________________

2
Question 8
What is another name for the declining balance method?
a. Activity method
b. Reducing balance method
c. Residual value method
d. Unit method
___________________________________________________________________________
Question 9
Payne Company purchased equipment in 2013 for $90,000 and estimated a $6,000 residual
value at the end of the equipment’s 10-year useful life. At December 31, 2019, there was
$58,800 in the Accumulated Depreciation account for this equipment using the straight-line
method of depreciation. On March 31, 2020, the equipment was sold for $26,000.
Prepare the appropriate journal entries to remove the equipment from the books of Payne
Company on March 31, 2020.
______________________________________________________________
Question 10
Donahue Company sold office equipment that had a book value of $7,000 for $8,000. The
office equipment originally cost $20,000 and it is estimated that it would cost $25,000 to
replace the office equipment.
Prepare the appropriate journal entry to record the disposition of the office equipment.
______________________________________________________________
Question 11
Tidwell Company sold Machine A in 2020, the details of which are given below:

Machine A
Cost $118,000
Purchase date 7/1/16
Useful life 8 years
Residual value $6,000
Depreciation method Straight-line
Date sold 7/1/20
Sales price $55,000
Instructions
Journalize all entries required to update depreciation and record the sales of Machine A in
2020. The company has recorded depreciation on the machine through December 31, 2019.

_____________________________________________________

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