Deck 6: Accounting for Long-Term Operational Assets

Question 1

When a building is purchased simultaneously with land, the purchase price must be allocated between the building and the land.

Answer 1

True

Question 2

Accumulated Depreciation is a temporary account that is closed each year.

Answer 2

False

Question 3

Gains and losses are reported as non-operating items on the income statement.

Answer 3

True

Question 4

Recognizing depreciation expense on equipment or a building is an asset use transaction.

Question 5

Expenditures that extend the useful life of a plant asset are added to the asset account.

Question 6

Title search and document costs incurred to purchase a building are expensed in the period the building is acquired.

Question 7

The term used to recognize expense for property, plant, and equipment assets is depletion.

Question 8

Generally accepted accounting principles require that, when the estimated useful life of a long-term asset is changed, previously-issued financial statements should not be revised.

Question 9

The use of estimates and revision of estimates are uncommon in financial reporting.

Question 10

Late in a plant asset's useful life, the amount of depreciation that would be recorded with the double-declining-balance method is less than the amount that would be recognized with straight-line depreciation.

Question 11

Intangible assets include patents, copyrights, and franchises.

Question 12

The purchase of a new delivery truck for cash is an asset use transaction.

Question 13

When depreciation is recorded on equipment, Depreciation Expense is increased and Equipment is decreased.

Question 14

Land differs from other property because it is not subject to depreciation.

Question 15

An expenditure that improves the quality of service provided by a plant asset is added to the historical cost of the asset.

Question 16

With an accelerated depreciation method, an asset can be depreciated below its salvage value.

Question 17

A substantial amount spent to improve the quality or extend the life of a long-term asset is called a revenue expenditure.

Question 18

A copyright is an intangible asset with an indefinite useful life.

Question 19

A trademark is a tangible asset with an indefinite useful life.

Question 20

The depreciable cost of a long-term asset is the difference between the amount paid for the asset and its salvage value.

Question 21

An impairment of an intangible asset decreases the asset, stockholders' equity, and net income.

Question 22

On March 1, Bartholomew Company purchased a new stamping machine with a list price of $70,000. The company paid cash for the machine; therefore, it was allowed a 5% discount. Other costs associated with the machine were: transportation costs, $1,300; sales tax paid, $3,120; installation costs, $1,000; routine maintenance during the first month of operation, $1,200. The cost recorded for the machine was:

A) $70,920.
B) $66,500.
C) $73,120.
D) $71,920.

Question 23

Which of the following terms is used to identify the process of expense recognition for property, plant and equipment?

A) Amortization
B) Depreciation
C) Depletion
D) Revision

Question 24

Which of the following intangible assets is the value attributable to favorable factors such as reputation, location, and superior products?

A) Copyrights
B) Franchises
C) Goodwill
D) Trademarks

Question 25

Chico Company paid $510,000 for a basket purchase that included office furniture, a building and land. An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Office furniture $115,000; Building $410,000, Land $85,000. Based on this information, the amount of cost that would be allocated to the office furniture is closest to:

A) $115,000.
B) $96,135.
C) $170,000.
D) $56,000.

Question 26

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,900,000. Harding paid $350,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $374,000; Building, $1,100,000 and Equipment, $726,000. What value will be recorded for the building?

A) $175,000
B) $950,000
C) $800,000
D) $1,100,000

Question 27

Depletion of a natural resource is usually calculated using the straight-line basis.

Question 28

Which of the following would be classified as a long-term operational asset?

A) Notes receivable
B) Trademark
C) Inventory
D) Accounts receivable

Question 29

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,995,000. Harding paid $560,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $592,000; Building, $1,760,000 and Equipment, $1,168,000.Assume that Harding uses the units-of-production method when depreciating its equipment. Harding estimates that the purchased equipment will produce 1,110,000 units over its 5-year useful life and has salvage value of $18,000. Harding produced 276,000 units with the equipment by the end of the first year of purchase.Which amount below is closest to the amount Harding will record for depreciation expense for the equipment in the first year? (Round your intermediate percentages to the nearest whole number: i.e 0.054231 = 5%. Do not round any other intermediate calculations.)

A) $290,422
B) $151,178
C) $159,222
D) $285,946

Question 30

Anchor Company purchased a manufacturing machine with a list price of $96,000 and received a 2% cash discount on the purchase. The machine was delivered under terms Free On Board shipping point, and freight costs amounted to $4,400. Anchor paid $6,300 to have the machine installed and tested. Insurance costs to protect the asset from fire and theft amounted to $8,200 for the first year of operations. Based on this information, the amount of cost recorded in the asset account would be:

A) $104,780.
B) $94,080.
C) $98,480.
D) $112,980.

Question 31

On January 6, Year 1, the Mount Jackson Corporation purchased a tract of land for a factory site for $1,500,000. An existing building on the site was demolished and the construction of the new factory building was completed on October 11, Year 1. Additional cost data are shown below: $\begin{array}{llr} \text { construction cost of new building } &\$1,760,000\\ \text {Realtor's and attorney's fees } &15,400\\ \text { Architect's fees relating to construction of new} &138,000\\ \text { building } &\\ \text { Cost to demolish old building} &133,200\\ \text { Salvage recovery from old building } &(11,000)\\\end{array}$
Which of the following correctly states the capitalized cost of the land and the new factory building, respectively?

A) $1,637,600 and $1,898,000
B) $1,515,400 and $2,020,200
C) $1,648,600 and $1,887,000
D) $1,500,000 and $2,035,600

Question 32

On January 6, Year 1, the Mount Jackson Corporation purchased a tract of land for a factory site for $815,000. An existing building on the site was demolished and the construction of the new factory building was completed on October 11, Year 1. Additional cost data are shown below: $\begin{array}{llr} \text { construction cost of new building } &\$984,000\\ \text {Realtor's and attorney's fees } &16,800\\ \text { Architect's fees relating to construction of new} &82,000\\ \text { building } &\\ \text { Cost to demolish old building} &75,700\\ \text { Salvage recovery from old building } &(12,000)\\\end{array}$
Which of the following correctly states the capitalized cost of the land and the new factory building, respectively?

A) $895,500 and $1,066,000
B) $815,000 and $1,146,500
C) $831,800 and $1,129,700
D) $907,500 and $1,054,000

Question 33

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,900,000. Harding paid $350,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $374,000; Building, $1,100,000 and Equipment, $726,000. Assume that Harding uses the units-of-production method when depreciating its equipment. Harding estimates that the purchased equipment will produce 1,000,000 units over its 5-year useful life and has salvage value of $34,000. Harding produced 265,000 units with the equipment by the end of the first year of purchase.
Which amount below is closest to the amount Harding will record for depreciation expense for the equipment in the first year? (Do not round your intermediate calculations.)

A) $193,450
B) $125,200
C) $157,145
D) $165,890

Question 34

Chico Company paid $950,000 for a basket purchase that included office furniture, a building and land. An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Office furniture $190,000; Building $740,000, Land $132,000. Based on this information, the amount of cost that would be allocated to the office furniture is closest to: (Round your intermediate percentages to 2 decimal places: ie 0.054231 = 5.42%.)

A) $171,000.
B) $190,000.
C) $316,667.
D) $105,000.

Question 35

Which of the following would not be classified as a tangible long-term asset?

A) Delivery truck
B) Timber stand
C) Land
D) Copyright

Question 36

The cost of natural resources includes the purchase price, as well as exploration costs and surveys.

Question 37

Goodwill is the added value of a successful business that is attributable to factors that enable the business to earn above-average profits.

Question 38

When Company X purchases Company Y, X should record Y's assets at their fair market value at the time of the acquisition.

Question 39

Which of the following is not subject to depreciation?

A) Computers
B) Buildings
C) Land
D) Office furniture

Question 40

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $2,375,000. Harding paid $700,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $778,920; Building, $2,161,080 and Equipment, $786,000.What value will be recorded for the building?

A) $406,000
B) $175,000
C) $1,377,500
D) $2,161,080

Question 41

Laramie Company paid $800,000 for a purchase that included land, building, and office furniture. An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Land, $100,000, Building, $740,000, and Office Furniture, $160,000. Based on this information the cost that would be allocated to the land is:

A) $80,000.
B) $70,000.
C) $100,000.
D) $107,000.

Question 42

The recognition of depreciation expense acts to:

A) Decrease assets, stockholders' equity, and cash flow from operating activities.
B) Increase cash flow from operating activities, and does not affect the amount of total assets.
C) Increase assets, stockholders' equity, and cash flow from operating activities.
D) Decrease assets and stockholders' equity, and does not affect cash flow.

Question 43

On January 1, Year 1, Milton Manufacturing Company purchased equipment with a list price of $88,000. A total of $4,000 was paid for installation and testing. During the first year, Milton paid $6,000 for insurance on the equipment and another $2,200 for routine maintenance and repairs. Milton uses the units-of-production method of depreciation. Useful life is estimated at 100,000 units, and estimated salvage value is $8,000. During Year 1, the equipment produced 13,000 units. What is closest to the amount of depreciation for the year?

A) $10,920
B) $11,960
C) $11,700
D) $12,740

Question 44

Laramie Company paid $1,000,000 for a purchase that included land, building, and office furniture. An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Land, $176,000, Building, $682,000, and Office Furniture, $242,000. Based on this information the cost that would be allocated to the land is: (Do not round intermediate calculations.)

A) $131,840.
B) $160,000.
C) $176,000.
D) $197,094.

Question 45

On January 1, Year 1, Phillips Company made a basket purchase including land, a building and equipment for $380,000. The appraised values of the assets are $20,000 for the land, $340,000 for the building and $40,000 for equipment. Phillips uses the double-declining-balance method of depreciation for the equipment which is estimated to have a useful life of four years and a salvage value of $5,000. The depreciation expense for Year 1 for the equipment is:

A) $17,000.
B) $20,000.
C) $9,500.
D) $19,000.

Question 46

The Dalen Company purchased office equipment that cost $3,000 cash on January 1. In addition, the Company paid $500 cash for installation fees to get the equipment ready for use. The equipment had an estimated five-year useful life and an estimated salvage value of $750. The company uses the straight-line method. The amount of accumulated depreciation shown on the balance sheet and the amount of cash flow from investing activities shown of the statement of cash flows at the end of the first year, respectively, would be: $\begin{array}{llcc} \text { Balance Sheet} & \text { Statement of Cash Flows } \\\end{array}$
A. $\begin{array}{cc}&\$3,500&&&&&\$(3,500) \\\end{array}$
B. $\begin{array}{cc}&\$5500&&&&&&\$(3,500) \\\end{array}$
C. $\begin{array}{cc}&\$450&&&&&&\$(3,000) \\\end{array}$
D. $\begin{array}{cc}&\$0&&&&&&&\$(550) \\\end{array}$

A) Option A.
B) Option B.
C) Option C.
D) Option D.

Question 47

On January 1, Year 1, Milton Manufacturing Company purchased equipment with a list price of $28,000. A total of $2,200 was paid for installation and testing. During the first year, Milton paid $3,300 for insurance on the equipment and another $610 for routine maintenance and repairs. Milton uses the units-of-production method of depreciation. Useful life is estimated at 100,000 units, and estimated salvage value is $4,400. During Year 1, the equipment produced 12,000 units. What is closest to the amount of depreciation for the year? (Do not round intermediate calculations.)

A) $3,096
B) $3,565
C) $4,020
D) $3,492

Question 48

On January 1, Year 1, Friedman Company purchased a truck that cost $27,000. The truck had an expected useful life of 100,000 miles over 8 years and a $7,000 salvage value. During Year 2, Friedman drove the truck 38,000 miles. The company uses the units-of-production method. The amount of depreciation expense recognized in Year 2 is: (Do not round intermediate calculations.)

A) $10,260.
B) $7,600.
C) $2,500.
D) $3,375.

Question 49

At the end of the current accounting period, Ringgold Company recorded depreciation of $15,000 on its equipment. The effect of this entry on the company's balance sheet is to decrease:

A) assets and increase liabilities.
B) stockholders' equity and decrease assets.
C) assets and increase stockholders' equity.
D) stockholders' equity and increase liabilities.

Question 50

On January 1, Year 1, Phillips Company made a basket purchase including land, a building and equipment for $850,000. The appraised values of the assets are $58,000 for the land, $860,000 for the building and $152,000 for equipment. Phillips uses the double-declining-balance method of depreciation for the equipment which is estimated to have a useful life of four years and a salvage value of $10,000. The depreciation expense for Year 1 for the equipment is: (Round your intermediate percentages to 2 decimal places: ie .054231 = 5.42%.)

A) $76,000.
B) $38,000.
C) $30,196.
D) $60,393.

Question 51

On January 1, Year 1, Friedman Company purchased a truck that cost $29,000. The truck had an expected useful life of 8 years and a $7,000 salvage value. The company uses the double-declining balance method. The book value of the truck at the end of Year 1 is: (Do not round intermediate calculations.)

A) $14,750.
B) $23,500.
C) $16,500.
D) $21,750.

Question 52

On January 1, Year 1, Friedman Company purchased a truck that cost $48,000. The truck had an expected useful life of 8 years and an $8,000 salvage value. The company uses the double-declining balance method. The book value of the truck at the end of Year 1 is:

A) $43,000.
B) $38,000.
C) $40,000.
D) $36,000.

Question 53

Which financial statement(s) is (are) affected when depreciation expense is recognized?

A) Income statement
B) Balance sheet
C) Statement of cash flows
D) Income statement and balance sheet
E) Income statement, balance sheet, and statement of cash flows

Question 54

On January 1, Year 1, Missouri Company purchased a truck that cost $47,000. The truck had an expected useful life of 10 years and a $5,000 salvage value. The amount of depreciation expense recognized in Year 2 assuming that Missouri uses the double declining-balance method is:

A) $7,520.
B) $6,720.
C) $4,700.
D) $9,400.

Question 55

On January 1, Year 1, Missouri Company purchased a truck that cost $57,000. The truck had an expected useful life of 10 years and a $6,000 salvage value. The amount of depreciation expense recognized in Year 2 assuming that Missouri uses the double declining-balance method is:

A) $9,120.
B) $11,400.
C) $10,200.
D) $8,160.

Question 56

Which method of depreciation is used by most U.S. companies for financial reporting purposes?

A) Straight-line
B) Units-of-production
C) Double-declining-balance
D) None of these answer choices are correct

Question 57

Anchor Company purchased a manufacturing machine with a list price of $160,000 and received a 2% cash discount on the purchase. The machine was delivered under terms Free On Board shipping point, and freight costs amounted to $2,400. Anchor paid $3,000 to have the machine installed and tested. Insurance costs to protect the asset from fire and theft amounted to $3,600 for the first year of operations. Based on this information, the amount of cost recorded in the asset account would be:

A) $156,800.
B) $159,200.
C) $165,800.
D) $162,200.

Question 58

Which of the following is considered an accelerated depreciation method?

A) Double-declining-balance
B) Units-of-production
C) Straight-line
D) Both double-declining-balance and units-of-production

Question 59

Flagler Company purchased equipment that cost $90,000. The equipment had a useful life of 5 years and a $10,000 salvage value. Flagler used the double-declining-balance method to depreciate its assets. Which of the following choices accurately reflects how the recognition of the first year's depreciation would affect the company's financial statements?

A) Option A
B) Option B
C) Option C
D) Option D

Question 60

On March 1, Bartholomew Company purchased a new stamping machine with a list price of $34,000. The company paid cash for the machine; therefore, it was allowed a 5% discount. Other costs associated with the machine were: transportation costs, $550; sales tax paid, $1,360; installation costs, $450; routine maintenance during the first month of operation, $500. The cost recorded for the machine was:

A) $34,210.
B) $32,300.
C) $35,160.
D) $34,660.

Question 61

On January 1, Year 1, Mike Moving Company paid $27,000 to purchase a truck. Mike planned to drive the truck for 50,000 miles then sell it. The truck was expected to have a $3,000 salvage value. The truck was actually driven 15,000 miles during Year 1, 10,000 miles during Year 2, 5,000 miles during Year 3, and 20,000 miles during Year 4. If Mike uses the units of production method, which of the following shows how the adjustment to recognize depreciation expense at the end of Year 3 will affect the company's financial statements?

A) Option A
B) Option B
C) Option C
D) Option D

Question 62

Dinkins Company purchased a truck that cost $93,000. The company expected to drive the truck 100,000 miles over its 5-year useful life, and the truck had an estimated salvage value of $14,500. If the truck is driven 35,500 miles in the current accounting period, what would be the amount of depreciation expense for the year? (Do not round intermediate calculations.)

A) $33,015.
B) $27,868.
C) $15,700.
D) $37,200.

Question 63

Dinkins Company purchased a truck that cost $46,000. The company expected to drive the truck 100,000 miles over its 5-year useful life, and the truck had an estimated salvage value of $8,000. If the truck is driven 26,000 miles in the current accounting period, what would be the amount of depreciation expense for the year?

A) $11,960
B) $9,880
C) $9,200
D) $7,600

Question 64

On January 1, Year 1, Mike Moving Company paid $27,000 to purchase a truck. The truck was expected to have a four-year useful life and $3,000 salvage value. If Mike uses the straight-line method, which of the following shows how the adjustment to recognize depreciation expense at the end of Year 3 will affect the Company's financial statements?

A) Option A
B) Option B
C) Option C
D) Option D

Question 65

Zebra Company purchased a van for $8,000 cash on January 1, Year 1. On the purchase date, how would Zebra's financial statements be affected?

A) Option A
B) Option B
C) Option C
D) Option D

Question 66

Madison Company owned an asset that had cost $44,000. The company sold the asset on January 1, Year 4, for $16,000. Accumulated depreciation on the day of sale amounted to $32,000. Based on this information, the sale would result in:

A) A $16,000 cash inflow in the investing activities section of the cash flow statement.
B) A $16,000 increase in total assets.
C) A $4,000 gain in the investing activities section of the statement of cash flows.
D) A $4,000 cash inflow in the financing activities section of the cash flow statement.

Question 67

Jing Company was started on January 1, Year 1 when it issued common stock for $50,000 cash. Also, on January 1, Year 1 the company purchased office equipment that cost $34,000 cash. The equipment was delivered under terms FOB shipping point, and transportation cost was $2,000. The equipment had a five-year useful life and a $12,000 expected salvage value.Using double-declining-balance depreciation, what the amount of depreciation expense and the amount of accumulated depreciation, respectively, that would appear on the December 31, Year 3 financial statements?

A) $0 and $24,000
B) $960 and $24,000
C) $8,640 and $23,040
D) $5,184 and $28,224

Question 68

On January 1, Year 1, the City Taxi Company purchased a new taxi cab for $39,000. The cab has an expected salvage value of $2,000. The company estimates that the cab will be driven 200,000 miles over its life. It uses the units-of-production method to determine depreciation expense. The cab was driven 48,000 miles the first year and 50,800 the second year. What would be the depreciation expense reported on the Year 2 income statement and the book value of the taxi, respectively, at the end of Year 2?

A) $9,878 and $19,792.
B) $9,878 and $17,792.
C) $9,398 and $20,722.
D) $9,398 and $18,722.

Question 69

On January 1, Year 1, Friedman Company purchased a truck that cost $48,000. The truck had an expected useful life of 100,000 miles over 8 years and an $8,000 salvage value. During Year 2, Friedman drove the truck 18,500 miles. The company uses the units-of-production method. The amount of depreciation expense recognized in Year 2 is:

A) $8,880.
B) $7,400.
C) $6,000.
D) $5,000.

Question 70

Jing Company was started on January 1, Year 1 when it issued common stock for $39,000 cash. Also, on January 1, Year 1 the company purchased office equipment that cost $16,300 cash. The equipment was delivered under terms FOB shipping point, and transportation cost was $2,400. The equipment had a five-year useful life and a $6,100 expected salvage value.Assume that Jing Company earned $26,200 cash revenue and incurred $16,500 in cash expenses in Year 3. Using straight-line depreciation and assuming that the office equipment was sold on December 31, Year 3 for $10,000, the amount of net income or (loss) appearing on the December 31, Year 3 income statement would be:

A) ($2,460).
B) $3,060.
C) $6,040.
D) $5,940.

Question 71

On January 1, Year 1, the City Taxi Company purchased a new taxi cab for $36,000. The cab has an expected salvage value of $2,000. The company estimates that the cab will be driven 200,000 miles over its life. It uses the units-of-production method to determine depreciation expense. The cab was driven 45,000 miles the first year and 48,000 the second year. What would be the depreciation expense reported on the Year 2 income statement and the book value of the taxi, respectively, at the end of Year 2?

A) $8,640 and $19,260
B) $8,640 and $17,260
C) $8,160 and $20,190
D) $8,160 and $18,190

Question 72

Emir Company purchased equipment that cost $110,000 cash on January 1, Year 1. The equipment had an expected useful life of six years and an estimated salvage value of $8,000. Assuming that Emir depreciates its assets under the straight-line method, the amount of depreciation expense shown on the income statement prepared for Year 4 and the amount of accumulated depreciation shown on the balance sheet prepared as of December 31, Year 4, respectively, would be: $\begin{array} { l c c } & \text { Depreciation expense } &\text { Accumulated } \\&&\text { depreciation } \\\end{array}$
A. $\begin{array} { l c c } &&& \$ 17,000 &&&&&& \$ 17,000 \\\end{array}$
B. $\begin{array} { l c c } &&& \$ 17,000 &&&&&& \$ 68,000 \\\end{array}$
C. $\begin{array} { l c c } &&& \$ 68,000 &&&&&& \$ 17,000 \\\end{array}$
D. $\begin{array} { l c c } &&& \$ 17,000 &&&&&& \$ 51,000\end{array}$

A) Option A
B) Option B
C) Option C
D) Option D

Question 73

On September 10, Year 5, Farmer Company sold a piece of equipment for $6,000 cash. The equipment had an original cost of $34,000 and accumulated depreciation of $31,000 at the time of the sale. Which of the following correctly shows the effect of the sale on the Year 5 financial statements?

A) Option A
B) Option B
C) Option C
D) Option D

Question 74

On January 1, Year 1, Dinwiddie Company purchased a car that cost $45,000. The car had an expected useful life of 6 years and a $10,000 salvage value. Based on this information alone:

A) the total amount of depreciation expense recognized over the six-year useful life will be greater under the double-declining-balance method than the straight-line method.
B) the amount of depreciation expense recognized in Year 4 would be greater if Dinwiddie depreciates the car under the straight-line method than if the double-declining-balance method is used.
C) at the end of Year 3, the amount in the accumulated depreciation account will be less if the double-declining-balance method is used than it would be if the straight-line method is used.
D) None of these statements is true.

Question 75

Chubb Company paid cash to purchase equipment on January 1, Year 1. Select the answer that shows how the recognition of depreciation expense in Year 2 would affect the financial statements (+ means increase, − decrease, and NA not affected).

A) Option A
B) Option B
C) Option C
D) Option D

Question 76

Jing Company was started on January 1, Year 1 when it issued common stock for $33,000 cash. Also, on January 1, Year 1 the company purchased office equipment that cost $15,700 cash. The equipment was delivered under terms FOB shipping point, and transportation cost was $1,800. The equipment had a five-year useful life and a $6,200 expected salvage value.Using double-declining-balance depreciation, what the amount of depreciation expense and the amount of accumulated depreciation, respectively, that would appear on the December 31, Year 3 financial statements?

A) $0 and $15,300.
B) $100 and $11,300.
C) $3,283 and $18,583.
D) $5,472 and $14,592.

Question 77

Jing Company was started on January 1, Year 1 when it issued common stock for $50,000 cash. Also, on January 1, Year 1 the company purchased office equipment that cost $34,000 cash. The equipment was delivered under terms FOB shipping point, and transportation cost was $2,000. The equipment had a five-year useful life and a $12,000 expected salvage value.Assume that Jing Company earned $30,000 cash revenue and incurred $19,000 in cash expenses in Year 3. Using straight-line depreciation and assuming that the office equipment was sold on December 31, Year 3 for $16,000, the amount of net income or (loss) appearing on the December 31, Year 3 income statement would be:

A) ($6,600).
B) $6,600.
C) $600.
D) $5,400.

Question 78

Jing Company was started on January 1, Year 1 when it issued common stock for $50,000 cash. Also, on January 1, Year 1 the company purchased office equipment that cost $34,000 cash. The equipment was delivered under terms FOB shipping point, and transportation cost was $2,000. The equipment had a five-year useful life and a $12,000 expected salvage value.At the end of Year 5, assuming the equipment had not been sold, the book value of the office equipment using straight-line depreciation and double-declining-balance depreciation, respectively, would be:

A) $12,000 and $1,680.
B) $12,000 and $12,000.
C) $0 and $0.
D) None of these answer choices are correct.

Question 79

Which of the following statements is true with regard to depreciation expense?

A) Different companies in the same industry always depreciate similar assets by the same methods.
B) A company using straight-line will show a smaller book value for assets than if the same company uses double-declining-balance.
C) Choosing double-declining-balance over straight-line will produce a greater total depreciation expense over the asset's life.
D) Although their opinions may differ, managers should choose the allocation method (straight-line, accelerated, or units-of-production) that best matches expenses with revenues.

Question 80

A machine with a book value of $38,000 is sold for $32,000 cash. Which of the following answers would accurately represent the effects of the sale on the financial statements?

A) Option A
B) Option B
C) Option C
D) Option D