7) ABC Company acquired a delivery truck on January 4, 2010. The total cost of t

Question

7) ABC Company acquired a delivery truck on January 4, 2010. The total cost of the truck was $87,000 ABC estimated that the truck would be used for 5 years before being sold for an estimated $16,500. Oxford uses the double-declining balance method of depreciation. Depreciation expense for the year ended Dec. 31, 2010 (Year 1) was equal to: a) $14,100 b) $28,200 c) $34,800 d) $12,528 Refer to the information above. The depreciation expense for the year ended December 31, 2011 was: 8) a) $28,200 b) $20,880 c) $18,300 d) $14,280 Expenditures that create the expectation of future benefits applicable beyond the current period are called: a) Capital expenditures b) Revenue expenditures c) Ordinary expenditures d) Repair & Maintenance expense 9) 10) ABC Company purchased an asset with a cost of $12,000; salvage value of $2,000; and useful life of 10 years. If the company uses straight-line depreciation, what would be the book value of the asset at the end of the third year of use? a) $7,000 b) $9,000 c) $10,000 d) $3,000 11) ABC Company purchased a machine 3 years ago at a cost of $64,500. At that time, useful life was estimated at 12 years with a $6,900 salvage value, and straight-line depreciation was used. At the beginning of the fourth year of use, ABC decided to revise i and salvag machine's life is: a) $4,800 b) $5,575 c) $8,640 d) $8,920 its original estimates from 12 to 8 years e value from $6,900 to $5,500. The depreciation expense to be recorded in year 4 of the

Explanation / Answer

7. Option C is correct.

SLM rate = 20%

Double declining rate = 2*20 % i.e. 40 %

Value of asset = 87000 *40% i.e $34800

8. Option B is correct.

Value of asset at the year end = 87000- 34800

= $52200

Depreciation = $52200 * 40%

=$20880

9. Expenditure which gives future economic benefit are capital expenditure.

Option A is correct.

10.

Depreciation = 12000-2000 / 10 year

= $1000 per year

Book vlaue at the end of third year =12000- 1000*3

= $9000

Option B is correct.

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