1.On January 1, 2012, Vandell, Inc., purchased a new machine for $96,000. Its estimated useful life is 16 years with an expected salvage value of $16,000. Assuming double-declining balance depreciation, 2013 depreciation expense is:
A. $10,500
B. $ 8,750
C. $ 6,000
D. $12,000
E. None of the above
2.Several years ago, Farr, Inc. purchased a computer costing $45,000, for which total depreciation of $33,000 has been recorded. Assuming that the computer is sold for $15,000 cash, the proper entry to record the sale is:
A. Debit Cash, $15,000; debit Accumulated Depreciation, $33,000;
credit Computer, $45,000
B. Debit Cash, $15,000; debit Accumulated Depreciation, $33,000;
credit Computer, $48,000
C. Debit Cash, $15,000; debit Accumulated Depreciation, $33,000;
credit Computer, $45,000; credit Gain on Sale of Computer, $3,000
D. Debit Cash, $15,000; credit Computer $12,000;
credit Gain on Sale of Computer, $3,000
E. None of the above
3.How is the gain (loss) on a plant asset sale calculated?
A. Asset sale price - Total accumulated depreciation
B. Asset sale price - Book value on balance sheet
C. Asset sale price - Asset purchase cost
D. Asset market value - Asset sale price
4.The purpose of depreciation accounting is to:
A. Reflect changes in the current value of a plant asset over its useful life
B. Accumulate funds to replace a plant asset at the end of its useful life
C. Allocate a plant asset's cost, less its salvage value, to expense over the asset's useful life
D. Have a plant asset's book value equal its initial cost by the end of its useful life
E. None of the above
5.Which of the following depreciation methods most closely relates periodic depreciation expense to the periodic use of the asset?
A. Straight line.
B. Units of production.
C. Double-declining balance
D. None of the above
6.Brahms Company purchased land and a building for a total price of $2,600,000. Individually, the land was appraised at $420,000 and the building at $2,380,000.
How much should be recorded as the acquisition cost of each asset?
A. Land, $420,000; building, $2,380,000
B. Land, $420,000; building, $2,180,000
C. Land, $390,000; building, $2,210,000
D. Land, $400,000; building, $2,200,000
E. None of the above1 points
7.On January 1, 2011, Andrew Company issues $300,000, 15 year, 8% bonds (paying semiannual interest) for $358,800, when the annual market rate of interest is 6%. If the company uses the effective interest method of amortization, the journal entry to record the semi-annual interest on June 30 will include a:
A. Debit to premium on bonds payable for $1,236
B. Credit to cash for $24,000
C. Debit to interest expense for $12,000
D. Debit to interest expense for $21,528
8.Ranch Company estimates warranty expense as 5% of sales. On January 1, warranties payable was $10,000, and the December 31 liability for the warranty was $11,000. During the year Ranch recorded sales of $120,000. The amount paid by Ranch during the year to meet its warranty obligations was:
A. $ 6,000
B. $ 7,000
C. $ 5,000
D. $15,000
9.Baker Company sells four tires to Alex Bradley. Each tire retails for $95 and is subject to sales tax of 5% and federal excise tax of 10%. Baker Company's journal entry to record the transaction is:
Answer
A. Cash 437
Sales 437
B. Cash 380
Sales 380
C. Cash 380
Sales Tax Expense 19
Excise Tax Expense 38
Sales 437
D. Cash 437
Sales Tax Expense 19
Excise Tax Expense 38
Sales 437
Sales Tax Payable 19
Excise Tax Payable 38
E. Cash 437
Sales 380
Sales Tax Payable 19
Excise Tax Payable 38
10.Megan Company borrowed $12,000 from Bank of Maryland on December 1, 2011, and signed a 90 day, 8% Notes Payable. If Megan's accounting period ends on December 31, 2011, which of the following will be not true for Megan Company (assume each month has 30 days)?
A. On March 1, 2012, Megan will debit Interest Payable for $160
B. On December 31, 2011, Megan will debit Interest Expense for $80
C. On March 1, 2012, Megan will debit Interest Expense for $160
D. On December 31, 2011, Megan will credit Interest Payable for $80