Clemen Co. computes depreciation to the nearest whole month and uses the straigh
ID: 2574170 • Letter: C
Question
Clemen Co. computes depreciation to the nearest whole month and uses the straight-line method. On May 2, 2015, the company purchased an asset for $18,000 with a four-year life and a $3,600 residual value. On Octover 6, Karen also sold an asset with a cost of $34,500 that had been purchased in 2015. The sold asset had been estimated to have a five-year life and NO residual value when it was purchased. The depreciation expense on these two assets in 2015 would be:
A) $7,575 B) $10,500 C) $9,300 D) $7,600
On January 1, 2015, Danville Corporation acquired a machine at a cost of $60,000. The machine's service life was estimated to be ten years and its residual value to be $6,000. The straight line method was used for depreciation. On January 1, 2020, the machine was no longer useful and was sold for $3,000. For 2020, in regard to this machine, how much of a loss should Danville record?
A) $27,000 B) $30,000 C) $3,000 D) $60,000
In its first year of operations, Roger Co. purchased trading securities at a total cost of $53,000. On December 31, the end of Roger's fiscal year, the fair market value of those investments totaled $57,000. As a result of these investments, Roger Co. will report:
A) Investment in Trading Securities of $57,000
B) Investment in Trading Securities of $53,000
C) Unrealized HOlding Gain/Loss - Trading Securities of $4,000 on the income statement as ordinary income
D) A credit balance in the contra account to Investment in Trading Securities of $4,000
Wright Co. has available-for-sale debt and equity securiteis that on December 31, 2017, had a cost of $110,000 and a market value of $108,000. The market value rose to $123,000 by December 31, 2018. What accounting action is required on December 31, 2018?
A) Allowance for Change in Fair Value of Investments should be creditied for $15,000
B) Unrealizing Holding Gain/Loss-Available-for-sale securities should be debited for $13,000
C) Allowance for change in fair value of investments should be debited for $15,000
D) Unrealized Holding Gain/Loss-Available-for-sale securities should be credited for 13,000
Explanation / Answer
B) $10,500
On May 2, 2015, Depreciation per annum= (cost-residual value) / useful life=18000-3600/4 = 3600
On Oct 6, 2015, Depreciation per annum= (cost-residual value) / useful life=34500-0/5 = 6900
So the depreciation expense on these two assets in 2015 would be: $3600+$6900= $10500
B) $30,000
A) Investment in Trading Securities of $57,000
C) Allowance for Change in Fair Value of Investments should be debited for $15,000. i.e ($123000-$108000)
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