5. A company purchased a weaving machine for $190,000. The machine has a useful

Question

5. A company purchased a weaving machine for $190,000. The machine has a useful life of 8 years and a residual value of S10,000. It is estimated that the machine could produce 75,000 bolts of woven fabric over its useful life. In the first year, 15,000 bolts were produced. In the second year, production increased to 19,000 units. Using the units-of-production method, what is the amount of accumulated depreciation at the end of the second year? A) $48,133 B) S45,600 C) S86,133 D) $23,750 E) $81,600 6. A company used straight-line depreciation for an item of equipment that cost $12,000, had a salvage value of $2,000 and a five-year useful life. After depreciating the asset for three complete years, the salvage value was reduced to $1,200 but its total useful life remained the same. Determine the amount of depreciation to be charged against the equipment during cach of the remaining years of its useful life. A) $1,000 B) S1,800 C) S5.400 D) $2,400 E) $2,000 7. A company exchanges its old office cquipment and $80,000 cash for a new office equipment. The old office equipment has a book value of $56,000 and a fair value of $40,000 on the date of the exchange. The cost of the new office equipment would be recorded at A) $136,000. B) S120,000 C) S96,000. D) $56,000 E) cannot be determined. 8. Holding a copyright: A) Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 70 years. B) Gives its owner an exclusive right to manufacture and sell a patented item or to use a process for 20 years. C) Gives its owner an exclusive right to manufacture and sell a device or to use a process for 50 years D) Indicates that the value of a company exceeds the fair market value of a company's net assets if purchased separately E) Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus 20 years.

Explanation / Answer

5). The Answer is "E"

Calculation :-

= (($190000 - $10000)/75000)*(15000+19000)

= ($180000/75000)*34000

= $81600

6). The Answer is "D".

Calculation :-

Depreciation for 3 years = (($12000 - $2000)/5)*3

= $2000*3 = $6000

Depreciation After Salvage value Revised = ($12000 - $6000 - $1200)/2

= $4800 / 2

= $2400

7). The answer is "B"

Cost of New Equipment :-

= Cash Paid + Old Equipment's Fair Value

= $80000 + $40000

= $120000

8). The Answer is "A".

A). Gives its owner the exclusive right to publish and sell a musical or literary work during the life of the creator plus

70 years.

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