Accounting Exam Help needed

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Question 1

Which of the following items should NOT be depreciated because it doesn't wear out? 

a.

Natural resources 

b.

Land

c.

Tangible property, plant, and equipment other than land 

d.

Intangible property 

Question 2

Which of the following accounting principles requires depreciation?

a.

The revenue concept 

b.

The matching concept 

c.

Reliability concept 

d.

Entity concept 

Question 3

Which of the following items is a factor to consider when computing depreciation expense? 

a.

The useful life of the asset

b.

The residual value of the asset 

c.

The cost of the asset 

d.

All of the above 

Question 4

Which of the following factors are considered as estimates? 

a.

The cost of the asset

b.

The useful life of the asset 

c.

The residual value of the asset 

d.

Both B and C 

Question 5

Which of the following depreciation methods allocates an equal amount of depreciation to each year? 

a.

Units-of-production 

b.

Straight-line 

c.

Declining-balance 

d.

All of the above 

Question 6

Which of the following depreciation methods writes off more depreciation near the start of an asset's life than in later years? 

a.

Units-of-production 

b.

Straight-line 

c.

Declining-balance 

d.

All of the above 

Question 7

Which of the following properly describes accumulated depreciation? 

a.

Accumulated depreciation is a contra-liability account. 

b.

Accumulated depreciation is an expense account. 

c.

Accumulated depreciation is a contra-equity account. 

d.

Accumulated depreciation is a contra-asset account. 

Question 8

Which of the following is the purpose of accumulated depreciation? 

a.

Accumulated depreciation's purpose is to provide details about the cost expiration of natural assets.

b.

Accumulated depreciation's purpose is to provide details about the cost expiration of intangible assets. 

c.

Accumulated depreciation is an expense. 

d.

Accumulated depreciation's purpose is to capture all the depreciation taken to date on plant assets. 

Question 9

Which of the following depreciation methods does NOT use a residual value in the depreciation formula? 

a.

Units-of-production 

b.

Declining-balance 

c.

Straight-line 

d.

All of the above 

Question 10

On January 1, 2011, Zane Manufacturing Company purchased a machine for $40,000.  The company expects to use the machine a total of 24,000 hours over the next 6 years.  The estimated sales price of the machine at the end of 6 years is $4,000. The company used the machine 8,000 hours in 2011 and 12,000 in 2012.

What is depreciation expense for 2011 if the company uses double-declining balance depreciation? 

a.

$13,333 

b.

$8,889 

c.

$6,000 

d.

$10,000

Question 11

On January 1, 2011, Zane Manufacturing Company purchased a machine for $40,000.  The company expects to use the machine a total of 24,000 hours over the next 6 years.  The estimated sales price of the machine at the end of 6 years is $4,000. The company used the machine 8,000 hours in 2011 and 12,000 in 2012.

 What is depreciation expense for 2012 if the company uses double declining balance depreciation? 

a.

$13,333 

b.

$8,889 

c.

$6,000 

d.

$10,000 

Question 12

On January 1, 2011, Zane Manufacturing Company purchased a machine for $40,000.  The company expects to use the machine a total of 24,000 hours over the next 6 years.  The estimated sales price of the machine at the end of 6 years is $4,000.  The company used the machine 8,000 hours in 2011 and 12,000 in 2012.

 What is the BOOK VALUE of the machine at the end of 2012 if the company uses double-declining balance depreciation? 

a.

$20,000 

b.

$17,778 

c.

$13,333 

d.

$28,000 

Question 13

On January 1, 2011, Zane Manufacturing Company purchased a machine for $40,000.  The company expects to use the machine a total of 24,000 hours over the next 6 years.  The estimated sales price of the machine at the end of 6 years is $4,000.  The company used the machine 8,000 hours in 2011 and 12,000 in 2012.

What is depreciation expense for 2012 if the company uses straight-line depreciation?

a.

$6,000 

b.

$9,000 

c.

$13,333 

d.

$10,000 

Question 15

The depreciation method where salvage value is ignored until the end of the life of the asset is:

a.

straight-line.

b.

MACRS.

c.

double-declining-balance

d.

units-of-output.

Question 16

An asset has a life of 3 years.  It cost $90,000 and has an expected salvage value of $15,000. 

Using straight-line depreciation, what is the depreciation expense each of the three years?

a.

$30,000

b.

$35,000

c.

$25,000

d.

$45,000

Question 17

An asset costs $80,000 and has a salvage value of $7,000.  It has a four-year life.  Using double-declining-balance depreciation, year 1 depreciation would be:

a.

$20,000.

b.

$40,000.

c.

$18,250.

d.

$36,500.

Question 18

A company purchased a computer on July 1, 2009. The computer has an estimated useful life of 5 years and will have no salvage value and was purchased for $10,000.

It is estimated that the computer can be used for 5,000 hours.  The computer was used for 450 hours during 2009. 

If the goal is to reduce taxable income to the lowest amount, which method should be elected and how much depreciation can be deducted in 2009?

Answer

a.

Units-of-production, $900 

b.

Straight-line, $1,000 

 

c.

Double declining-balance, $2,000 

d.

None of the above 

Question 19

Which depreciation method is used most often for tax purposes?

a.

Units of production

b.

Straight-line

c.

Double-declining-balance

d.

None of the above

Question 20

When is a gain on disposal of an asset recorded? 

Answer

a.

A gain is recorded when accumulated depreciation is less than the cash received. 

b.

A gain is recorded when the asset's residual value is less than the cash received. 

c.

A gain is recorded when the asset is sold for a price less than the asset's book value.

d.

A gain is recorded when the asset is sold for a price greater than the asset's book value. 

Question 21

An asset was purchased for $12,000. The asset's estimated useful life was 3 years and its residual value was $2,000.

How much gain or loss is reported if the asset is sold for $3,000 at the beginning of the fourth year? 

Answer

a.

$1,000 gain 

b.

$2,000 loss 

c.

No gain or loss 

d.

$1,000 loss 

Question 22

An asset was purchased for $12,000.  The asset's estimated useful life was 3 years and its residual value was $2,000. 

How much gain or loss is reported if the asset is sold for $1,000 at the end of the fourth year? 

Answer

a.

$1,000 loss

b.

$1,000 gain 

c.

$2,000 loss 

d.

No gain or loss 

Question 23

Which of the following items is included in the journal entry if a company sells equipment at a price less than its book value? 

Answer

a.

A debit to Equipment for its book value 

b.

A credit to Gain on sale of equipment 

c.

A debit to Loss on sale of equipment 

d.

A credit to Accumulated depreciation 

Question 24

Kelly Petroleum Products owns furniture that was purchased for $19,600.  Accumulated depreciation is $17,300. 

The furniture was sold for $3,800. 

Which of the following is the correct entry to record the transaction?

Answer

a.

Accumulated depreciation

17,300

Cash

3,800

Gain on sale of furniture

1,500

Furniture

19,600

b.

Accumulated depreciation

17,300

Cash

3,800

Furniture

31,100

c.

Furniture

19,600

Gain on sale of furniture

3,800

Cash

2,700

Accumulated depreciation

17,300

d.

Furniture

19,600

Cash

2,700

Gain on sale of furniture

5,000

Accumulated depreciation

17,300

 


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