Question 1a A used machine with a purchase price of $54,000, requiring an overha
ID: 2460820 • Letter: Q
Question
Question 1a
A used machine with a purchase price of $54,000, requiring an overhaul costing $5,000, installation costs of $3,000, and special acquisition fees of $1,000, would have a cost basis of:
$62,000
$58,000
$55,000
$63,000
Question 1b
The method of determining depreciation that yields successive reductions in the periodic depreciation charge over the estimated life of the asset is:
straight-line
units-of-production
declining-balance
time-valuation
Question 1c
A machine with a cost of $45,000 has an estimated residual value of $5,000 and an estimated life of 5 years or 15,000 hours. What is the amount of depreciation for the second full year, using the declining-balance method at double the straight-line rate?
$16,000
$9,600
$10,800
$18,000
Question 1d
Which of the following below is an example of a capital expenditure?
replacing an engine in a company car
cleaning the carpet in the front room
replacing all burned-out light bulbs in the factory
tune-up for a company truck
Question 1e
A capital expenditure results in a debit to:
an asset account
a stockholders' equity account
an expense account
a liability account
$62,000
$58,000
Explanation / Answer
Question 1 a) Cost of Machine= $54,000+$5,000+$3,000+$1,000=$63,000
Question 1 b) Declining balance
Question 1 c) Depreciation % under straight line method= 1/5 years=20%
Double of straight line method is 2 x 20%=40%
Cost of Machine $45.000
Less: Dep 1st year 40% (18,000)
------------
$27,000
Dep 2nd year 40% $10,800
$10,800
Question 1 d) replacing an engine in a Company car as increases the efficiency
Question 1 e) an asset Account
Eg : Cash paid to size of the Building
Dr Building
Cr Cash
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