Accounting Chapter 7 Review

Strawberry Fields purchased a tractor at a cost of $36,000 and sold it two years later for $23,100. Strawberry Fields recorded depreciation using the straight-line method, a five-year service life, and an $7,000 residual value.

Wiley Company purchased new equipment for $50,000. Wiley paid cash for the equipment. Other costs associated with the equipment were: transportation costs, $2,600; sales tax paid $3,500; and installation cost, $3,000. The cost recorded for the equipment was:

Cowboy Development incurred the following costs associated with the purchase of a piece of land that it will use to re-build an office building: Sale price of the land $600,000 Sale of salvaged parts already on land $21,000 Demolition of the old building $25,000 Ground breaking ceremony (food and supplies) $2,500 Land preparation and leveling $8,200 What amount should be recorded for the purchase of the land?

Kansas Enterprises purchased equipment for $73,000 on January 1, 2018. The equipment is expected to have a five-year life, with a residual value of $8,550 at the end of five years. Using the straight-line method, depreciation expense for 2018 would be:

A machine has a cost of $17,100, an estimated residual value of $4,110, and an estimated useful life of eight years. The machine is being depreciated on a straight-line basis. At the end of the second year, what amount will be reported for accumulated depreciation?

Schager Company purchased a computer system at a cost of $33,000. The estimated useful life is 7 years, and the estimated residual value is $9,000. Assuming the company will use the double-declining-balance method, what is the depreciation expense for the second year?

Which of the following would be recorded as land improvements?

Landon Co. purchased a $500,000 tract of land that is intended to be the site of a new office complex. Landon incurred additional costs and realized salvage proceeds as follows: Demolition of existing building on site $75,000 Legal and other fees to close escrow 15,000 Proceeds from sale of demolition scrap 10,000 What would be the capitalized cost of the land?

Which of the following subsequent expenditures would be capitalized?

Which one of the following regarding the book value of an asset is correct?

Which of the following is considered a "contra" account?

A machine has a cost of $15,000, an estimated residual value of $3,000, and an estimated useful life of four years. The machine is being depreciated on a straight-line basis. At the end of the second year, what amount will be reported for accumulated depreciation?

During the first two years, Supplies, Inc. drove the company truck 15,000 and 22,000 miles, respectively, to deliver merchandise to its customers. The company originally purchased the truck for $175,000. If the truck has an estimated life of 10 years or 300,000 miles, with an estimated residual value of $25,000, what amount of deprecation expense should Supplies, Inc. record in the second year using the activity-based method?

Abbott Company purchased a computer that cost $10,000. It had an estimated useful life of 5 years and no residual value. The computer was depreciated by the straight-line method and was sold at the end of the fourth year of use for $3,000 cash. Abbott should record:

Gains on the sale of long-term assets for cash:

Kansas Enterprises purchased equipment for $74,500 on January 1, 2018. The equipment is expected to have a ten-year life, with a residual value of $8,850 at the end of ten years. Using the double-declining balance method, depreciation expense for 2018 would be

Mountainview Resorts purchased equipment for $44,000. Residual value at the end of an estimated four-year service life is expected to be $7,400. The machine operated for 2,800 hours in the first year and the company expects the machine to operate for a total of 11,000 hours over its four year life. Calculate depreciation expense for the first year using each of the following depreciation methods: (1) straight-line, (2) double-declining-balance, and (3) activity-based.