Question

38. A machine with a cost of S480000 has an estimated salvage value of $30,000 and an estimated useful life of 5 years or 15,000 hours. It is to be depreciated using the units-of-activity method of depreciation. What is the amount of depreciation for the second full year, durmg which the machine was used 5,000 hours? A) 890,000 B) S160,000 C) S150,000 D) S130,000 39. Intangible assets include each of the following except A) goodwill. B) patents. C) copyrights. D) land improvements. 40. What financial statement reports revenues and expenses over a period of time A) Balance Sheet C) Cashflow Statement B) Statement of Owner's Equity D) Income Statement 41. Under a perpetual inventory, the Inventory account is used in each of the following except the entry to record A) the return of goods purchased. C) payment within the discount period. B) payment of freight on goods sold. D) goods purchased on account. 42. The formula for calculating gross profit is A) Net Income minus cost of goods sold. B) Purchases minus sales revenue. C) Cost of goods sold minus net income. D) Net sales revenue minus cost of goods sold. 43. The book value of a plant/fixed asset is the difference between the A) cost of the asset and the amount of depreciation expense for the year. B) proceeds received from the sale of the asset and its original cost. C) replacement cost of the asset and its historical cost. D) cost of the asset and the accumulated depreciation to date. 44. Cost allocation of an intangible asset is referred to as A) accretion. -B) amortization. C) capitalization. D) depletion. 45. On May 1, 2018, Pinkley Company sells office furniture for $300,000 cash. The office furniture originally cost $750,000 when purchased on January 1, 2011. Depreciation is recorded by the straight-line method over 10 years with a salvage value of $75,000. What gain should be recognized on the sale? A) 47,500. B) S22,500. C) 890,000. D) $45,000. 46. Many countries outside the U.S. have adopted standards issued by the International Accounting, Standards Board (IASB) commonly referred to as A) IDKN B) GASB C) IGOO D) IFRS

Answer 1

38 Depreciation expense per hour = (Asset cost - salvage value)/Total expected hours to operate = ($480,000-$30,000)/15,000 hours = $30 per hour Second year deprecition = $30 per hour x 5,000 hours = $150,000 Answer: C)$150,000 39 D. Land improvement 40 D. Income statement 41 C. Payment within the discount period. 42 D. Net sales revenue minus cost of goods sold 43 D. Cost of the asset and the accumulated depreciation to date 44 B. Amortization

45 Depreciation per year = (750,000-75,000)/10 =67,500 Accumulated depr. = (67,500x7)+(67,500x4/12) =$495,000 Book value =$750,000-$495,000 =255,000 Gain on sale =$300,000-255,000 =45,000 D. $45,000 46 D. IFRS