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1. On July 1, 2007, Hernandez Corporation boughtfactory equipment for $300,000. Salvage value was evaluated to be $8,000. Equipment will be depreciated over ten years by using double-declining balance method. Counting the year of acquisition as one-half year, Hernandez must record depreciation expense for 2008 on this equipment of

a. $60,000.

b. $54,000.

c. $52,560.

d. $48,000.

2. Plant asset has cost of $48,000 and a salvage value of $12,000. Asset has three-year life. If depreciation in third year amounted to $6,000, which depreciation method was used?

a. Straight-line

b. Declining-balance

c. Sum-of-the-years'-digits

d. Cannot tell from information given

3. On January 1, 2007, Accumulated Depreciation Machinery account of particular company illustrated a balance of $740,000. At the end of 2007, after the adjusting entries were posted, it showed a balance of $790,000. During 2007, one of the machines which cost $250,000 was sold for $121,000 cash. This resulted in loss of $8,000. Suppose that no other assets were disposed of during the year, how much was depreciation expense for 2007?

a. $171,000

b. $187,000

c. $50,000

d. $121,000

4. Mintz Company obtained a tract of land containing an extractable natural resource. Mintz is needed by purchase contract to restore land to condition suitable for recreational use after it has extracted the natural resource. Geological surveys evaluate that recoverable reserves will be 4,000,000 tons, and that land will have a value of $1,000,000 after restoration. Relevant cost information follows:

Land $7,000,000
Estimated restoration costs $1,500,000

If Mintz maintains no inventories of extracted material, what must be the charge to depletion expense per ton of extracted material?

a. $2.13

b. $1.88

c. $1.76

d. $1.50

5. Net income is understated if, in first year, evaluated salvage value is excluded from depreciation computation when using:

  Straight-line Method  Production or Use Method 
a.  Yes  No 
b.  Yes  Yes 
c.  No  No 
d.  No  Yes 

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  • Category:- Accounting Basics
  • Reference No.:- M922578

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