# ACC Unit 8

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question
On May 1, 2015, Pinkley Company sells office furniture for \$300,000 cash. The office furniture originally cost \$750,000 when purchased on January 1, 2008. Depreciation is recorded by the straight-line method over 10 years with a salvage value of \$75,000. What depreciation expense should be recorded on this asset in 2015? \$22,500 \$22,550 \$25,000 \$33,750 \$67,500
\$22,500 Solution: [(\$750,000 - \$75,000) Â¸ 10] Ã— 4/12 = \$22,500
question
Carey Company buys land for \$50,000 on 12/31/14. As of 3/31/15, the land has appreciated in value to \$50,700. On 12/31/15, the land has an appraised value of \$51,800. By what amount should the Land account be increased in 2015? \$1,100 \$0 \$1,800 \$700
\$0
question
A gain or loss on disposal of a plant asset is determined by comparingï¼š The replacement cost of the asset with the asset's original cost The cost of the asset and the amount of depreciation expense for the year The book value of the asset with the proceeds received from its sale The book value of the asset with the asset's original cost
The book value of the asset with the proceeds received from its sale Correct: Explanation: The gain or loss on disposal is the difference between the proceeds received from sale and the book value of assets. The books value of assets equals to the difference between original cost and accumulated depreciation.
question
If a plant asset is retired before it is fully depreciated and no salvage value is received, None of choices is correct a gain on disposal occurs a loss on disposal occurs neither a gain nor a loss occurs either a gain or a loss can occur
a loss on disposal occurs
question
If a plant asset is retired before it is fully depreciated, and the salvage value received is less than the asset's book value, there is no gain or loss on disposal. a loss on disposal occurs. a gain on disposal occurs. additional depreciation expense must be recorded.
a loss on disposal occurs.
question
On May 1, 2015, Pinkley Company sells office furniture for \$300,000 cash. The office furniture originally cost \$750,000 when purchased on January 1, 2008. 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? \$47,500 \$45,000 \$22,500 \$90,000 \$50,000
\$45,000 \$300,000 - (\$750,000 - \$495,000) = \$45,000
question
Grimwood Trucking purchased a tractor trailer for \$171,500. Grimwood uses the units-of-activity method for depreciating its trucks and expects to drive the truck 1,000,000 miles over its 12-year useful life. Salvage value is estimated to be \$24,500. If the truck is driven 90,000 miles in its first year, how much depreciation expense should Grimwood record? \$15,435 \$13,230 \$14,292 \$12,250
\$13,230 (\$171,500 - \$24,500) Ã· \$1,000,000 = \$.147; \$90,000 Ã— \$.147 = \$13,230
question
On January 1st 2017, AC Company bought a machine at \$35,000. It has a useful life of 5 years and a salvage value of \$5,000 at the end of the fifth year. It is expected to operate 9,000 hours. During 2017, the machine was used for 3,000 hours. Among the three different depreciation method, straight-line, units-of-activity and double declining-balance, which one will produce the lowest Asset Account Balance at the end of 2017? Units-of-Activity Method All of them will produce the same result. Double Declining-balance Method Straight-line Method
Double Declining-balance Method First, we need to calculate the depreciation expense under the three methods. Straight-line: (\$35,000 - \$5,000)/5 = \$6,000 Units-of-Activity: (\$35,000 - \$5,000) x (3,000/9,000) = \$10,000 Double Declining-balance: \$35,000 x 1/5 x 2 = \$14,000 When depreciation expense is recorded, we will debit depreciation expense and credit accumulated depreciation. Accumulated depreciation is a contra-asset account, so the method that generates the highest depreciation expense will produce the lowest Asset account balance.
question
Which of the following statements is true? Recording depreciation on plant assets affects the balance sheet and the income statement. In calculating depreciation, both plant asset cost and useful life are based on estimates. None of the statements are correct. When purchasing delivery equipment, sales taxes and motor vehicle licenses should be charged to Delivery Equipment. Land improvements are generally charged to the Land account.