Exam 7: Reporting and Analyzing Liabilities and Stockholders Equity

Sprague Associates sold office furniture for $48000.The furniture had an original cost of $144000 and accumulated depreciation of $72000.Ignoring the tax effect as a result of the sale

Goodwill

Jack's Copy Shop bought equipment for $240000 on January 1 2021.Jack estimated the useful life to be 3 years with no salvage value and the straight-line method of depreciation will be used.On January 1 2022 Jack decides that the business will use the equipment for a total of 5 years.What is the revised depreciation expense for 2022?

A machine that was purchased on January 1 for $60000 has an estimated salvage value of $12000.If the machine's depreciation rate is 20% its annual depreciation is

Bates Company purchased equipment on January 1 2021 at a total invoice cost of $1200000.The equipment has an estimated salvage value of $30000 and an estimated useful life of 5 years.What is the amount of accumulated depreciation at December 31 2022 if the straight-line method of depreciation is used?

An expenditure for which of the following items would be considered a revenue expenditure?

Goodwill can be recorded

Rains Company purchased equipment on January 1 at a list price of $125000 with a 2% discount if payment is made within a 10-day discount period.Payment was made within the discount period.Rains paid $6250 sales tax on the equipment and paid installation charges of $2200.Prior to installation Rains paid $5000 to pour a concrete slab on which to place the equipment.What is the total cost of the new equipment?

Pearson Company bought a machine on January 1 2022.The machine cost $180000 and had an expected salvage value of $30000.The life of the machine was estimated to be 5 years.The depreciation expense using the straight-line method of depreciation is

National Molding 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?

A change in the estimated useful life of a plant asset may cause a change in the amount of depreciation recognized in the current and future periods but not in prior periods.

A machine costing $176000 was destroyed when it caught fire.At the date of the fire the accumulated depreciation on the machine was $80000.An insurance check for $200000 was received based on the replacement cost of the machine.Recording the insurance proceeds and the disposition of the machine will include a(n)

On January 2 2002 equipment with a cost of $640000 was purchased in exchange for a note.The equipment has an estimated salvage value of $60000 and an estimated life of 12000 hours.It is to be depreciated by the units-of-activity method.Use the following tabular analysis to determine the adjustment that would be made for depreciation for the first full year if the equipment was used 3000 hours.

The balance in Accumulated Depreciation represents the

Wesley Hospital installs a new parking lot.The paving cost $60000 and the lights to illuminate the new parking area cost $24000.Which of the following statements is true with respect to these additions?

Depreciation is the process of allocating the cost of a plant asset over its useful life in a(n)

Which of the following assets does not decline in service potential over the course of its useful life?

Carnival Corporation purchased a limousine for $185000 on June 2 2022.Sales taxes amounted to $3500 and there was a cost of $10000 for painting the company's logo on the side.The company paid for two employees to attend a training course and get chauffers' licenses at a cost of $2500.Use the following tabular analysis to show the effect of these expenditures on Carnival's accounts assuming that all payments were made in cash.

A plant asset must be fully depreciated before it can be removed from the books.

Equipment costing $105000 with a salvage value of $21000 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 6 years and no change in the salvage value the depreciation expense for Year 3 would be