4. Answer the following true/false questions and then select the correct yultipl

Question

4. Answer the following true/false questions and then select the correct yultiple choice answer: Jf a company is concerned about minimizing its income tax burden in the earlier years of an asset's life, it would use the straight-line method of depreciation to accomplish this objective. Begardless of the depreciation method used, the total amount of depreciation over the life of the asset will be the same. A revenue expenditure is treated as an expense in the period it is incurred. A. True, True, True B. True, True, False C. True, False, True D. False, True, True E. False, False, False 5. Reflex Corp purchased equipment on June 30, 2009 for S50,000. It had an estimated useful life of 10 years and an estimated salvage value ofS12,000. On January 1,2017, it was sold for $24,000. Reflex uses the straight line method of depreciating its assets. The journal entry to record the disposal of this asset would include A debit to Gain for $2,500 A debit to Accumulated Depreciation for $28,500 A credit to Equipment for $21,500 A credit to Gain for $4,400 A debit to Loss for $2,500 A. B. C. D. E. 6. Which of the following would NOT be included in the total cost recorded for the purchase of equipment? A. Repairs made to the equipment due to damages that happened during installation. B. Purchase price of the equipment, less any discounts received for early payment. C. Freight charges paid to have the equipment delivered. D. Sales tax paid on the equipment. E. Cost of labor to have the equipment installed. 7. A warehouse supply company purchased land, a building, and equipment in a lump-sum purchase for $495,000. An independent appraisal set the value of the land at $296,000, the building at $210,900, and the equipment at S62,700. Immediately following the purchase, the company spent S24,200 renovating the building to get it ready for its intended use. At what amount should the warehouse supply company record each new asset? (Round to the nearest whole percentage) A. C. E. Land $165,000 $257,400 $258,821 $269,984 $296,000 Buildin $165,000 $207,350 $205,551 $192,104 $235,100 Equipment $165,000 $54,450 $54,828 $57,112 $ 62,700

Explanation / Answer

4. False, True, True

5. B- Debit to accumulated depreciation 28,500

6.A- Repairs made to equipment due to damages that happened during installation.

Normal repairs are revenue expenditure and charged to the income statement when it is incurred.

7.The Answer is B

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Account Desceription Debit Credit Cash $        24,000 Accumulated Depreciation $        28,500 Equipment $ 50,000 Gain on Sale $    2,500

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