Question

41.

Smith Co. sold equipment that had cost $8,000 and had accumulated depreciation of $6,700. The sale price for the equipment was $2,000. The entry to record the sale will include a

		a. debit to Equipment for $8,000
		b. credit to Accumulated Depreciation, Equipment, for $6,700
		c. credit to Cash for $2,000
		d. credit to Gain on Sale of Equipment for $700

42.

Kinder Co. purchased a car for $25,000, with an estimated useful life of 5 years and a residual value of $10,000. Kinder uses the straight-line depreciation method. After two years of use, the life of the car was increased by one (1) year, but the residual value remained unchanged. The depreciation on the car in year three should be:

		a. $3,000
		b. $2,250
		c. $4,500
		d. $2,500

43.

Smith Co. sold equipment that had cost $8,000 and had accumulated depreciation of $6,700. The sale price for the equipment was $1,000. The entry to record the sale will include a

		a. credit Gain on Sale of Equipment for $1,000
		b. debit Loss on Sale of Equipment for $300
		c. credit Cash for $1,000
		d. credit to Accumulated Depreciation, Equipment for $6,700

44.

A company had 100,000 shares outstanding on 1/1. 10,000 new shares were issued on 4/1, and 5,000 shares of treasury stock were purchased by the company from the stockholders on 7/1. What is the weighted average number of shares to be used for the year-end earnings per share calculation?

		a. 110,000
		b. 102,500
		c. 107,500
		d. 105,000

Answer 1

41)

Cost = $8,000

Less: Accumulated depreciation = $6,700

Book value of Equipment = $1,300

Sale value = $2,000

The entry to record sale is

Debit Cash account $2,000

Debit Accumulated depreciation account $6,700

Credit Equipment account $8,000

Credit Gain on sale of Equipment $700

Option 'D' is correct

Credit to Gain on sale of Equipment $700.

42) Depreciation expense of car = [25,000 - 10000] / 5 = 3,000

Book value of asset after 2 years of use = 25,000 - (3000*2) = 19,000

Revised useful life = 4, Only 2 years of use left

Depreciation expense in 3rd year = [$19,000 - $10,000] / 2 = $4,500

Option 'C' is correct

$4,500.

43)

Debit Cash account $1,000

Debit accumulated depreciation $6,700

Debit Loss on sales of asset $300

Credit Equipment account $8,000

So, Option ' b ' is correct

Debit Loss on sale of Equipment $300.

44) Weighted average number of shares = [(100,000 * 3/12) + (110,000 * 3/12) + (105,000 * 6/12)]

Weighted average number of shares = 25,000 + 27,500 + 52,500

Weighted average number of shares = 105,000 shares

Option 'd' is correct

105,000