Chapter 10

1 October 2022
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Land acquired so it can be resold in the future is listed in the balance sheet as a(n)
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investment
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Accumulated Depreciation
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contra asset account
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A BUILDING with an APPRAISEL value of $154,000 is made available at an offer price of $172,000.
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$160,000
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A CAPITAL expenditure results in a debit to
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an asset account
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Which of the following below is an example of a capital EXPENDITURE?
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replacing engine in company car
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All of the following below are needed for the calculation of STRAIGHT-LINE-depreciation except
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units produced
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A machine with a cost of $75,000 has an estimated residual value of $5,000 and an estimated life of 4 years or 18,000 hours. What is the amount of depreciation for the second full year, using the double declining-balance method?
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$18,750
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Residual value is also known as all of the following except
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net book value
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The formula for depreciable cost is
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initial cost - residual value
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The calculation for annual depreciation using the units-of-production method is
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(depreciable cost / estimated output) * the actual yearly output
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Computer equipment was acquired at the beginning of the year at a cost of $57,000 that has an estimated residual value of $9,000 and an estimated useful life of 5 years. Determine the 2nd year's depreciation using straight-line depreciation.
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$ 9,600
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Which of the following is true?
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Regardless of the depreciation method, the amount of total depreciation expense during the life of the asset will be the same.
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An asset was purchased for $120,000 on January 1, 2010 and originally estimated to have a useful life of 10 years with a residual value of $10,000. At the beginning of 2012, it was determined that the remaining useful life of the asset was only 4 years with a residual value of $2,000. Calculate the 2012 depreciation expense using the revised amounts and straight line method.
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$24,000
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A fixed asset with a cost of $41,000 and accumulated depreciation of $36,000 is traded for a similar asset priced at $50,000. Assuming a trade-in allowance of $4,000, the cost basis of the new asset is
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$50,000
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A fixed asset with a cost of $30,000 and accumulated depreciation of $28,500 is sold for $3,500. What is the amount of the gain or loss on disposal of the fixed asset?
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$2,000 gain
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When a company exchanges machinery and receives a trade-in allowance greater than the book value, this transaction would be recorded with the following entry (assuming the exchange was considered to have commercial substance):
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debit Machinery and Accumulated Depreciation; credit Machinery, Cash, and Gain on Disposal
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On December 31, Strike Company has decided to discard one of its batting cages. The initial cost of the equipment was $310,000 with an accumulated depreciation of $260,000. Depreciation has been taken up to the end of the year. The following will be included in the entry to record the disposal.
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Equipment Cr. $310,000
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On December 31, Strike Company has decided to sell one of its batting cages. The initial cost of the equipment was $310,000 with an accumulated depreciation of $260,000. Depreciation has been taken up to the end of the year. The company found a company that is willing to buy the equipment for $20,000. What is the amount of the gain or loss on this transaction?
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Loss of $30,000
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On December 31, Strike Company has decided to trade-in one of its batting cages for another one that has a cost of $500,000. The seller of the batting cage is willing to allow a trade-in amount of $11,000. The initial cost of the old equipment was $215,000 with an accumulated depreciation of $185,000. Depreciation has been taken up to the end of the year. The difference will be paid in cash. What is the amount of the gain or loss on this transaction?
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Loss of $19,000
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When a company replaces a component of property, plant and equipment, which statement below does not account for one of the steps in the process?
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book value of the replaced component is written off to depreciation expense
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The accumulated depletion account is
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reported on the balance sheet as a deduction from the cost of the mineral deposit
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The process of transferring the cost of metal ores and other minerals removed from the earth to an expense account is called
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depletion
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The term applied to the amount of cost to transfer to expense resulting from a decline in the utility of intangible assets is
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amortization
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On June 1, 2014, Aaron Company purchased equipment at a cost of $120,000 that has a depreciable cost of $90,000 and an estimated useful life of 3 years and 30,000 hours. Using straight line depreciation, calculate depreciation expense for the first year.
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$17,500
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On June 1, 2014, Aaron Company purchased equipment at a cost of $120,000 that has a depreciable cost of $90,000 and an estimated useful life of 3 years and 30,000 hours. Using straight line depreciation, calculate depreciation expense for the second year.
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$30,000