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Finance

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1. Depreciation is

a.

a decrease in the fair market value of an asset.

b.

an expense that is incurred during an accounting period.

c.

a method of saving cash to replace plant assets.

d.

added to the cost of equipment on the balance sheet.

e.

shown on the balance sheet as a liability.

 

 

2. Accumulated Depreciation, Equipment, is shown as a(n)

a.

expense on the income statement.

b.

liability on the balance sheet.

c.

deduction from net income on the statement of owner's equity.

d.

contra account on the balance sheet.

e.

addition to equipment on the balance sheet.

 

 

3. The type of account and normal balance of Accumulated Depreciation are

a.

contra asset, debit.

b.

asset, credit.

c.

asset, debit.

d.

liability, credit.

e.

contra asset, credit.

 

 

4. The adjusting entry to record depreciation of equipment is

a.

debit Accumulated Depreciation; credit Depreciation Expense.

b.

debit Depreciation Expense; credit Accumulated Depreciation.

c.

debit Equipment; credit Accumulated Depreciation.

d.

debit Depreciation Expense; credit Depreciation Payable.

e.

debit Accumulated Depreciation; credit Equipment.

 

 

5. Foster Company bought equipment on January 3 of this year for $10,000. At the time of purchase, the equipment was estimated to have a useful life of nine years and a trade-in value of $1,000 at the end of nine years. Using the straight-line method, the amount of one year's depreciation is

a.

$1,111.

b.

$1,222.

c.

$1,000.

d.

$9,000.

e.

$2,000.

 

 

6. If equipment cost $20,000 and accumulated depreciation amounts to $6,000, the book value of the equipment is

a.

$26,000.

b.

$6,000.

c.

$14,000.

d.

$20,000.

e.

none of these.

 

 

7. Dowdy Co. has equipment with a cost of $30,000 and accumulated depreciation of $22,000. What is the book value of the equipment?

a.

$8,000

b.

$30,000

c.

$52,000

d.

$22,000