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Homework answers / question archive / Louisiana State University, Shreveport ACCT 701 Assessment 5 1)On 2015 January 1, Jackson Company purchased equipment for $400,000, and installation and testing costs totaled $40,000

Louisiana State University, Shreveport ACCT 701 Assessment 5 1)On 2015 January 1, Jackson Company purchased equipment for $400,000, and installation and testing costs totaled $40,000

Accounting

Louisiana State University, Shreveport

ACCT 701

Assessment 5

1)On 2015 January 1, Jackson Company purchased equipment for $400,000, and installation and testing costs totaled $40,000. The equipment has an estimated useful life of 10 years and an estimated salvage value of $40,000. If Jackson uses the straight-line depreciation method, the depreciation expense for 2015 is:

($400,000-$40,000)/10=

 

 

a. $88,000 b. $40,000 c.   $80,000

d.   $36,000

e.   $44,000

 

2.            On July 1, 2015, Jackson Company purchased equipment for $400,000, and installation and testing costs totaled $40,000. The equipment has an estimated useful life of 10 years and an estimated salvage value of $40,000. If Jackson uses the double-declining-balance method, the depreciation expense for 2015 would be:

 

(2 x (100/10))=20%

(2 x 440,000)x(6/12)=$44,000

 

a. $88,000 b. $44,000 c.   $40,000

d.   $36,000

e.   $72,000

 

3.            Hatfield Company purchased a computer on January 1, 2013 for $10,000. The computer has an estimated salvage value of $3,000 and an estimated useful life of 5 years. At the beginning of 2015, the estimated salvage value changed to $1,000, and the computer is expected to have a remaining useful life of two years. The company always uses the straight-line method of depreciation. What is the depreciation expense for 2015?

 

(10000 – 7000)/5=$1,400 x 2 years = $2,800 10000-7200=7200

 

(7200-1000)/2=$3,100

 

a. $1,400 b. $3,100 c. 1,750

d.   $2,250

e.   $1,800

 

4.            To be classified as a plant asset, an asset must (mark all that apply). Each incorrect answer results in a negative point mark.

a.            Be used in business operations rather than held for resale b. Be tangible

c.             Cost over $100,000

d.            Have a useful service life of more than one year.

e.            Have a salvage value at least 20% of the purchase price

 

5.            Which answer is FALSE? In accounting for plant assets, accountants must:

a.            Record unit capacity of the asset (e.g. how many pages a copy machine is going to print over its life)

b.            Record subsequent expenditures on the asset (e.g. capital improvement)

c.             Record the acquisition cost of the asset.

d.            Account for the disposal of the asset (e.g. gains when the asset is sold)

 

6.            The units-of-production depreciation formula is:

a.            Depreciation per period = Depreciation per unit x Number of units of goods produced

b.            Depreciation per period = Asset cost + Estimated

c.             Estimated total units of production during useful life of asset-Salvage value

 

7.            When a fully depreciated asset is still in use:

a.            The asset should be removed off the books

b.            The asset cost on the books should be adjusted to reflect market value

c.             Past depreciation remains unchanged; no more depreciation should be taken; the asset continues to be carried on the books at a zero book value.

d.            Prior years’ depreciation should be reversed.

 

8.            On January 1, 2015, a company bought a machine for $120,000. The machine has a useful life of 5 years and a salvage value of $20,000. The company used the double declining balance method of depreciation. What is depreciation for 2016?

 

a. $28,800 b.   $40,000

c.             $48,000

d.   $24,000

 

9.            Land containing a mine having an estimated 1,000,000 tons of economically extractable ore is purchased for $375,000. After the ore deposit is removed, the land will be worth $75,000. If 100,000 tons of ore are mined and sold during the first year, the depletion cost changed to expense for the year is:

 

($375,000-$75,000)/1,000,000= $0.30 Depletion Charge per ton

$0.30 x 100,000 = $30,000

 

a. $30,000 b.   $35,000

c.             $37,500

d. None of these

e.   $300,000

f.             $375,000

 

 

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