2. Please select the best option among the given choices 2 points each a. You ha

Question

2. Please select the best option among the given choices 2 points each a. You have following info about a fixed asset: Cost $24,000: Expected Useful Life 5 years; Estimated Residual Value: $2,000. Based on it what would be the annual depreciation expense if you use straight-line method of depreciation? ii $3,000 iv. $4,400 1. $4,800 ii. $5,.200 b. Based on above info in a, what would be Accumulated Depreciation A/C balance at the end of 3d year? ii. $15,600 iv. $9,000 i. $13,200 ii. $14,400 What would the depreciation expense of IF year if you use Double Declining method c. of depreciation in a) above? iii. S8,800 iv. $6,000 i. $9,600 ii. S10,400 Gross profit under LIFO method of inventory is? i. Higher than LIFO d. ii. Lower than LIFO ii. Same as it is the same inventory iv. Cannot tell from info provided Which of the following is a liability account? i. Unearned Fee e. ii. Cash iv. Prepaid Insurance ii. Accounts Receivable f. Current balance of Office Supplies A/C is $2,200, but actual supplies on hand are only S1,765. What entry you need to match the amounts? i. Debit: Office Supplies ii. Debit: Supply Expense ii. Debit: Supply Expense iv. Debit: Office Supplies Credit: Credit: Supply Expense Office Supplies Credit Cash

Explanation / Answer

a) Annual depreciation expense = Purchase price - Residual value/Useful life
$24000-$2000/5
= $22000/5
= $4400
Rate of depreciation = $4400/$24000 = 18.33%
Option iv

b) Accumulated depreciation = Annual depreciation*3 years
= $4400*3
= $13200
Option i

c) Double declining balance method = 2*Rate of straight line method
= 2*18.33
= 36.67%
Depreciation per year = $24000*36.67% = $8800
Option iii

d) Gross profit under LIFO cannot be judged without the appropriate data.
Option iv

e) Prepaid insurance, cash and accounts receivables are all asset accounts.
Unearned fee is the liability account.
Option i

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