Questions -
Q1. On January 2, 2012, Wang Company acquired equipment to be used in its manufacturing operations. The equipment has an estimated useful life of 10 years and an estimated salvage value of $30,000. The depreciation applicable to this equipment was $140,000 for 2015, computed under the sum-of-the-years'-digits method. What was the acquisition cost of the equipment?
a. $1,070,000
b. $1,083,333
c. $1,100,000
d. $1,130,000
Q2. Which of the following would not be classified as an operating asset (PP&E)
a. Construction in progress
b. Coal mine
c. Land improvements
d. Land held as an investment
Q3. Determine the second year depreciation for an asset purchased at the beginning of the first year for $100,000. Assume the asset has a 5-year useful life and a residual value of $10,000. Use the straight-line method.
a. $20,000
b. $18,000
c. $16,400
d. $16,000
Q4. Song Company purchased a depreciable asset for $350,000 on April 1, 2012. The estimated salvage value is $35,000, and the estimated useful life is 5 years. The straight-line method is used for depreciation. What is the balance in accumulated depreciation on May 1, 2015 when the asset is sold?
a. $173,250
b. $147,000
c. $194,250
d. $126,000
Q5. Bell and Mayo are independent entities. Each owns a tract of land being held for development. However, each would prefer to build on the other s land. Accordingly, they agreed to exchange their land. From an independent appraisal report and the entities records, the following information was obtained: Bell s Land Cost and carrying amount: $80,000, Fair Value: $100,000. Mayo s Land Cost and carrying amount: $50,000, Fair Value: $85,000. Based on the difference in fair values, Mayo paid $15,000 to Bell. If Mayo did not consider the exchange to have commercial substance, at what amount should Mayo record the receipt of land?
a. $100,000
b. $85,000
c. $65,000
d. $50,000
Q6. Dennis Company purchases Miles Company for $5,000,000 cash on January 1, 2015. The book value of Miles Company's net assets reported on its December 31, 2014 financial statement was $3,800,000. An analysis indicated that the fair value of Miles's tangible assets exceeded the book value by $600,000, and the fair value of identifiable intangible assets exceeded book value by $320,000. Determine the fair value of identifiable net assets used to record goodwill.
a. $3,800,000.
b. $4,720,000.
c. $4,400,000.
d. $280,000.
Q7. Person Dot Company sold a delivery truck on July 1, 2005, for $5,500. The original cost of the truck was $30,000. Each December 31, Parson s recognized $4,500 of depreciation using the straight-line method. On January 1, 2005, the accumulated depreciation was $22,500. The liquidation value for the truck is $3,000 on July 1. Compute Parson s gain or loss on the sale of the truck.
a. $2,500 gain
b. $2,000 gain
c. $2,000 loss
d. $250 gain