Question

111.     A company purchased factory equipment on June 1, 2008, for $48,000. It is estimated that the equipment will have a $3,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2008, is

a.   $4,500.

b.   $2,625.

c.   $2,250.

d.   $1,875.

112.     A plant asset was purchased on January 1 for $40,000 with an estimated salvage value of $8,000 at the end of its useful life. The current year's Depreciation Expense is $4,000 calculated on the straight-line basis and the balance of the Accumulated Depreciation account at the end of the year is $20,000. The remaining useful life of the plant asset is

a.   10 years.

b.   8 years.

c.   5 years.

d.   3 years.

Use the following information for questions 113–115.

Brinkman Corporation bought equipment on January 1, 2008. The equipment cost $90,000 and had an expected salvage value of $15,000. The life of the equipment was estimated to be 6 years.

113.     The depreciable cost of the equipment is

a.   $90,000.

b.   $75,000.

c.   $50,000.

d.   $12,500.

114.     The depreciation expense using the straight-line method of depreciation is

a.   $17,500.

b.   $18,000.

c.   $12,500.

d.   none of the above.

115.     The book value of the equipment at the beginning of the third year would be

a.   $90,000.

b.   $75,000.

c.   $65,000.

d.   $25,000.

116.     Baden Company purchased machinery with a list price of $32,000. They were given a 10% discount by the manufacturer. They paid $200 for shipping and sales tax of $1,500. Baden estimates that the machinery will have a useful life of 10 years and a residual value of $10,000. If Baden uses straight-line depreciation, annual depreciation will be

a.   $2,050.

b.   $2,036.

d.   $3,050.

d.   $1,880.

Answer 1

Answer :

(111). Depreciation Expense (SLM) = (Original cost - Salvage value )/ Estimated life

= (48000 - 3000)/10

= $4500

So, option (a) is correct

(112).

As per straight line depreciation method every year depreciation is equal.

So on the basis of current year depreciation $ 4000 find out total useful life of plant.

Annual Depreciation = Cost of plant - salvage value / Useful life

So,. $ 4,000 = $ 40,000 - $ 8000 / useful life

Useful life = $ 32,000 / $ 4000

Now. Useful life = 8 years

So total estimated useful life plant is 8 years.

Now on the basis of total accumulated depreciation find how many year completed.

Total accumulated depreciation with current year is $ 20,000.

Now on the basis of total accumulated depreciation decided by annual depreciation find out numbers of years completed.

Years completed = Total accumulated depreciation / Annual depreciation

= $20,000 / $ 4000

= 5 years completed

Remaining useful life of plant

= Total useful life - Total years completed

= 8 years - 5 years

= 3 years

Option (d) 3 years

(113)

Cost = $90,000

Salvage = $15,000

Depreciation = (Cost - Salvage value)

Depreciation cost = $75,000 [$90000 - $15000]

The correct answer is (b) $75000

(114)

Straight line depreciation = (Cost - Salvage value)/use life

Straight line depreciation = ($90000 - $15000)/6

Straight line depreciation $12500

The correct answer is (c) $12500

(115)

Year	Operating book value	Depreciation	Closing book value
0			$90,000
1	$90,000	$12,500	$77,500
2	$77,500	$12,500	$65,000
3	$65,000

The book value at the beginning 3rd year is $65000

The correct answer is (c) $65000

(116)

Annual depreciation = (Cost of accuisition - residual value)/useful life

cost of acquisition = 32000 - 32000*10%+1500 = 30500

Annual depreciation = (30500 -10000)/10 = $2050

correct answer is (a). $2,050

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