1) Mohr Company purchases a machine at the beginning of the year at a cost of $3
ID: 2555831 • Letter: 1
Question
1) Mohr Company purchases a machine at the beginning of the year at a cost of $38,000. The machine is depreciated using the double-declining-balance method. The machine’s useful life is estimated to be 5 years with a $7,000 salvage value. The machine’s book value at the end of year 2 is:
$18,600.
$11,800.
$15,200.
$13,680.
$22,800.
2) Crestfield leases office space for $7,000 per month. On January 3, the company incurs $25,000 to improve the leased office space. These improvements are expected to yield benefits for 10 years. Crestfield has 5 years remaining on its lease. What journal entry would be needed to record the expense for the first year related to the improvements?
Debit Amortization Expense $2,500; credit Accumulated Amortization $2,500.
Debit Depletion Expense $5,000; credit Accumulated Depletion $5,000.
Debit Depreciation Expense $2,500; credit Accumulated Depreciation $2,500.
Debit Depletion Expense $25,000; credit Accumulated Depletion $25,000.
Debit Amortization Expense $5,000; credit Accumulated Amortization $5,000.
3) Martin Company purchases a machine at the beginning of the year at a cost of $100,000. The machine is depreciated using the double-declining-balance method. The machine’s useful life is estimated to be 4 years with a $8,300 salvage value. The machine’s book value at the end of year 3 is:
$50,000.
$75,000.
$87,500.
$12,500.
$11,450.
4) A company purchased a delivery van for $24,900 with a salvage value of $2,700 on September 1, Year 1. It has an estimated useful life of 6 years. Using the straight-line method, how much depreciation expense should the company recognize on December 31, Year 1?
$1,383.
$3,700.
$925.
$1,233.
5) Martin Company purchases a machine at the beginning of the year at a cost of $72,000. The machine is depreciated using the straight-line method. The machine’s useful life is estimated to be 5 years with a $5,000 salvage value. Depreciation expense in year 4 is:
$14,400.
$13,400.
$67,000.
$57,600.
Thanks,
Explanation / Answer
Answer
Cost
$38000
Salvage Value
-7000
Depreciable base
$31000
Life
5
SLM Depreciation
$6200
SLM rate
20%
DDB Rate
40%
Opening Book Value
Depreciation @40%
Ending Book Value
Year 1
38000
15200
22800
Year 2
22800
9120
13680
Hence, the answer is Option 4: $13,680
Journal Entry would be
Depreciation Expense
Debit $2500
Accumulated Depreciation
Credit $2500
Hence, correct answer is Option 3
Cost
$100000
Salvage Value
-8300
Depreciable base
$91700
Life
4
SLM Depreciation
$22925
SLM rate
25%
DDB Rate
50%
Opening Book Value
Depreciation @50%
Ending Book Value
Year 1
100000
50000
50000
Year 2
50000
25000
25000
Year 3
25000
12500
12500
Hence, the answer is Option 4: $12,500
Cost
24900
Salvage Value
-2700
Depreciable base
22200
Life
6
SLM Depreciation
$3700
Hence, the answer is Option 2: $3,700
Cost
72000
Salvage Value
-5000
Depreciable base
67000
Life
5
SLM Depreciation
$13400
Hence, the answer is Option 2: $13,400
Cost
$38000
Salvage Value
-7000
Depreciable base
$31000
Life
5
SLM Depreciation
$6200
SLM rate
20%
DDB Rate
40%
Opening Book Value
Depreciation @40%
Ending Book Value
Year 1
38000
15200
22800
Year 2
22800
9120
13680
Hence, the answer is Option 4: $13,680
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