Question

1. Mohr Company purchases a machine at the beginning of the year at a cost of $30,000. The machine is depreciated using the double-declining-balance method. The machine’s useful life is estimated to be 5 years with a $5,000 salvage value. The machine’s book value at the end of year 2 is:

15,000 B 9,000 C 12,000 D 10,800 E 18,000

2. Mohr Company purchases a machine at the beginning of the year at a cost of $38,000. The machine is depreciated using the units-of-production method. The company estimates it will use the machine for 5 years, during which time it anticipates producing 62,000 units. The machine is estimated to have a $7,000 salvage value. The company produces 10,400 units in year 1 and 7,400 units in year 2. Depreciation expense in year 2 is:

A 7,000 B 62,000 C 15,200 D 37,00 E 22,800

3. Gary Marks is paid on a monthly basis. For the month of January of the current year, he earned a total of $8,638. FICA tax for Social Security is 6.2% on the first $118,500 of earnings each calendar year and the FICA tax for Medicare is 1.45% of all earnings. The FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. The amount of Federal Income Tax withheld from his earnings was $1,433.27. What is the amount of the employer's payroll taxes expenses for this employee? (Round your intermediate calculations to two decimal places.)

A 42.00 B 1080.81 C 378.00 D 535.56 E 125.25

4. Employees earn vacation pay at the rate of one day per month. During the month of July, 24 employees qualify for one vacation day each. Their average daily wage is $99 per day. What is the amount of vacation benefit expense to be recorded for the month of July?

A 237.6 B 99.0 C 23760.0 D 24.0 E 2376.0

Answer 1

1. Mohr Company

Answer: D. 10,800

Straight-line depreciation rate =100%/5 years = 20%

Double-declining depreciation rate = 2 x 20% = 40%

Year	Book Value Beginning of Year	x	Depreciation Rate	=	Annual Depreciation Expense	End of Year
						Accumulated Depreciation	Book Value
								1	30000		40%		12000	12000	18000
2	18000		40%		7200	19200	10800

2. Mohr Company

Answer: D. 3,700

Depreciable cost = $38000 - $7000 = $31000

Depreciation per unit = $31000/62000 = $0.50

Depreciation expense for year 2 = 7400 x $0.50 = $3700

3. Gary Marks

Answer: B. 1080.81

Employer's payroll taxes expense:

FICA tax for Social security (6.2% x $8638)	535.56
FICA tax for Medicare (1.45% x $8638)	125.25
FUTA tax (0.6% x $7000)	42.00
SUTA tax (5.4% x $7000)	378.00
Total payroll taxes expense $	1080.81

4. Answer: E. 2376.0

Vacation benefit expense for July = 1 day x 24 employees x $99 = $2376