49. A factory machine was purchased for $90,000 on January 1,2011. It was estima

Question

49. A factory machine was purchased for $90,000 on January 1,2011. It was estimated that it would have a $18,000 salvage value at the end of its 5-year useful life. It was also estimated that the machine would be run 40,000 hours in the 5 years. The company ran the machine for 4,000 actual hours in 2011. If the ation expense for 2011 would be A) $7,200 B) $14,400. C) $18,000. D) $9,000. 50. If the month-end bank statement shows a balance of $36,000, outstanding checks are $12,000, a deposit of $4,000 was in transit at month end, and a check for $500 was erroneously charged by the bank against the account, the correct balance in the bank account at month end is A) $27,500. B) $20,500. C) $28,500. D) $43,500. 51. The book value of a plant asset is always equal to its fair market value. A) True B) False 52. If the unit price of inventory is increasing during a period, a company using the LIFO inventory method will show less gross profit for the period, than if it had used the FIFO inventory method A) True B) False 53. Depreciation is a process of A) cost accumulation. B) cost allocation. C) asset valuation. D) asset devaluation.

Explanation / Answer

53- B -cost allocation because in depreciation cost of machine is allocated through out the life of machine

52 - A true because cost of goods sold would be calculated on the latest price(which is increasing) so cost of goods sold would be higher than FIFO method and this would result in less profit

51- Answer is B - false , it is not always equal to fair market value

50- Answer is C = 36000-12000+4000+500 = 28500

49- Answer is A -7200

units of activity method = (90000-18000)/40000 = 1.8

activity during 2011 = 4000

depreciation for 2011 = 1.8*4000 = 7200

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