Question

.) The total cost of an asset less its accumulated depreciation is calle A) Historical cost. Book value. C) Present value D) Current (market) value. E) Replacement cost. 14) A company purchased a delivery yan for $28.000 with a salvag ased a delivery van for $2.00 with a salvage value of $3,000 on September 1, Year 1. It ha Year 1. It has an estimated useful life of 5 years. Using the how much depreciation expense should the company roce A) $5,000. Pense should the company recognize on December 31, Year 1? B) $1,667. C) $1,400. D) $1,250. E) $2,067. ed useful life of 5 years. Using the straight-line method. 15) Ordinary repairs meet all of the following criteria except: A) Are expenditures to keep an asset in good operating condition. B) Are necessary if an asset is to perform to expectations over its useful ne. C) Extend the useful life of an asset bevond its original estimate by several years. D) Include cleaning, lubricating, and normal adjusting. E) Are treated as expenses. 10) A company discarded a computer system originally purchased for $18,000. The accumulated depreciation was $17,200. The company should recognize aan): A) SO gain or loss. B) $800 loss. C) $800 gain. D) $8,000 loss. E) $7,200 loss. 17) A company purchased a tract of land for its natural resources at a cost of $1,500,000. It expects to mine 2,000,000 tons of ore from this land. The salvage value of the land is expected to be $250,000. If 150,000 tons of ore are mined during the first year, the journal entry to record the depletion is: A) Debit Depletion Expense $93,750; credit Natural Resources $93,750. B) Debit Cash $112,500; credit Natural Resources $112,500. ) Debit Depletion Expense $93,750; credit Accumulated Depletion $93,750. ) Debit Cash $93,750; credit Accumulated Depletion $93,750. 3) Debit Depletion Expense $112,500; credit Accumulated Depletion $112,500.

Answer 1

13) The correct option is B) Book value, because the book value of an asset is equal to the cost of an asset less accumulated depreciation on the asset.

14) The correct option is B) $1,667, Calculation of depreciation:

Depreciation expense = [(cost-salvage value)/usdeful life]*(number of months asset used/total number of months)

   = [(28,000-3,000)/5]*(4/12)

= [25,000/5]*(4/12)

= $1,667

15) The correct option is C) Extends the useful life of an asset, because ordinary repairs do not extend the useful life of an asset, repairs are normal expenses incurred to maintain the asset in good condition.

16) The correct option is B) $800, loss. The book value of the asset is more than the sale value so the firm incurred a loss.

Calculation of loss:

Loss = Book value - Sale price

= (Cost - Accumulated depreciation) - Sale price

= (18,000 - 17,200) - 0

= 800

17)  The correct option is C) Debit depletion expense and credit accumulated depreciation expense by $93,750.

Calculation of depletion expense:

Depletion expense = Depletion per unit x Units consumed during the year

= 0.625 x 150000

= 93,750

Working note:

Depletion per unit = (Cost-salvage value)/Total units expected

= (1500000 - 250000)/ 2000000

= 0.625