Question

Peavey Enterprises purchased a depreciable asset for $22,500 on April 1, Year 1. The asset will be depreciated using the straight-line method over its four-year useful life. Assuming the asset's salvage value is $2,100, Peavey Enterprises should recognize depreciation expense in Year 2 in the amount of:

A) $4,250.00 B) $5,100.00 C)$19,550.00 D)$5,625.00 E)$20,400.00

Mohr Company purchases a machine at the beginning of the year at a cost of $44,000. The machine is depreciated using the straight-line method. The machine’s useful life is estimated to be 8 years with a $5,000 salvage value. Depreciation expense in year 2 is

A) $11,000. B)$0. C)$4,875. D)$39,000. E)$5,500.

A company purchased a tract of land for its natural resources at a cost of $2,012,000. It expects to mine 2,180,000 tons of ore from this land. The salvage value of the land is expected to be $268,000. The depletion expense per ton of ore is:

A) $0.923. B) $7.507 C) $1.046. D) $0.800. E) $8.134.

Phoenix Agency leases office space for $6,100 per month. On January 3, Phoenix incurs $69,600 to improve the leased office space. These improvements are expected to yield benefits for 8 years. Phoenix has 6 years remaining on its lease. Compute the amount of expense that should be recorded the first year related to the improvements.

A) $8,700. B) $6,100. C) $17,700. D) $14,800. E) $11,600.

A company purchased a weaving machine for $315,850. The machine has a useful life of 8 years and a residual value of $17,500. It is estimated that the machine could produce 765,000 bolts of woven fabric over its useful life. In the first year, 112,500 bolts were produced. In the second year, production increased to 116,500 units. Using the units-of-production method, what is the amount of depreciation expensethat should be recorded for the second year?

A) $89,310. B) $48,100. C) $46,449. D) $43,875. E) $45,435

Answer 1

1) Peavey Enterprises purchased a depreciable asset for $22,500 on April 1, Year 1. The asset will be depreciated using the straight-line method over its four-year useful life. Assuming the asset's salvage value is $2,100, Peavey Enterprises should recognize depreciation expense in Year 2 in the amount of:

Depreciation expense for year 2 = (22500-2100/4) = 5100

So answer is b) $5100

2) Mohr Company purchases a machine at the beginning of the year at a cost of $44,000. The machine is depreciated using the straight-line method. The machine’s useful life is estimated to be 8 years with a $5,000 salvage value. Depreciation expense in year 2 is

Depreciation expense for year 2 = (44000-5000/8) = 4875

So answer is c) $4875

3) A company purchased a tract of land for its natural resources at a cost of $2,012,000. It expects to mine 2,180,000 tons of ore from this land. The salvage value of the land is expected to be $268,000. The depletion expense per ton of ore is:

Depletion expense per ton = (2012000-268000)/2180000 = 0.80 per ton

so answer is d) $0.800

4) Phoenix Agency leases office space for $6,100 per month. On January 3, Phoenix incurs $69,600 to improve the leased office space. These improvements are expected to yield benefits for 8 years. Phoenix has 6 years remaining on its lease. Compute the amount of expense that should be recorded the first year related to the improvements.

Expense related to improvement in first year = 69600/6 = 11600

So answer is e) $11600

5) A company purchased a weaving machine for $315,850. The machine has a useful life of 8 years and a residual value of $17,500. It is estimated that the machine could produce 765,000 bolts of woven fabric over its useful life. In the first year, 112,500 bolts were produced. In the second year, production increased to 116,500 units. Using the units-of-production method, what is the amount of depreciation expensethat should be recorded for the second year?

Depreciation expense for second year = (315850-17500/765000)*116500 = 45435

So answer is e) $45435