The answers for these questions are 1)B, 2)D, 3)A, 4)C Any explanation on how to

Question

The answers for these questions are 1)B, 2)D, 3)A, 4)C

Any explanation on how to get these answers would be awesome! Thank you!

1.An asset is purchased on January 1 for $40,000. It is expected to have a useful life of five years after which it will have an expected salvage value of S5,000. The company uses the straight-line method. If it is sold for S30,000 exactly two years after its purchased, the company will record a: A) gain of S6,000 B) gain of $4,000 C) loss of $4,000 D) loss of $6,000 2.Before adjustment, the allowance for doubtful accounts has a credit balance of $1,900 The company had $210,000 of net credit sales during the period and historically fails to collect 3% of credit sales. The company uses the percentage of credit sales method of estimating doubtful accounts. After adjusting for estimated bad debts, the new balance in the allowance for doubtful accounts account will be: A) S3,700 B) $4,400 C) S6,300 D) S8,200 3.A piece of equipment was acquired on January 1, 2010, at a cost of $22,000, with an estimated residual value of $2,000 and an estimated useful life of four years. The company uses the double-declining-balance method. What is its book value at December 31,2011? A) S5,500 B) S10,000 C) S11,000 D) S12,000 4. The Widget Tool and Die Company buys a $400,000 stamping machine that has an estimated residual value of $20,000. The company expects the machine to produce two million units. It makes 400,000 units during the current period. If the units-of-production method is used, the depreciation expense for this period is: A) S80,000 B) S400,000 C) $76,000 D) S380,000

Explanation / Answer

Dear student, only one question is allowed at a time. I am answering the first question

1)

Depreciation under straight line method

= (Purchase cost – Salvage value) / Useful life

= ($40,000 - $5,000) / 5

= $7,000 per year

So, Depreciation for 2 years

= Depreciation per year x Number of years

= $7,000 x 2

= $14,000

Book value of the asset on date of sale

= Purchase cost – Accumulated depreciation

= $40,000 - $14,000

= $26,000

So, Gain on sale

= Selling price – Book value

= $30,000 - $26,000

= $4,000

So, as per above discussion, option B is the correct option

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