14) When a business sells a plant asset for book value, a gain or loss should be recorded.
15) When a plant asset is sold for less than its book value, a gain is recorded.
16) If a plant asset is sold for more than its book value, a loss is recorded.
17) On July 14, Jones Sporting Goods sold equipment that originally cost $50,000. After updating
depreciation, the Accumulated Depreciation – Equipment had a normal balance of $44,000. The selling
price of the equipment was $42,000. Jones will report a loss of $8,000.
18) An asset was purchased for $37,000 on January 1, 2019. The asset’s estimated useful life was five years,
and its residual value was $9000. The straight-line method of depreciation was used. Calculate the gain or
loss if the asset is sold for $19,000 on December 31, 2019, the last day of the accounting period.
A) $6200 gain
B) $12,400 loss
C) $12,400 gain
D) no gain or no loss
19) The gain or loss on the sale of a plant asset is determined by comparing the market value of assets
received with the ________ of asset sold.
A) book value
B) residual value
C) original cost
D) salvage value
20) Motor Sales sold its old office furniture for $9000. The original cost was $17,000, and at the time of
sale, accumulated depreciation was $14,000. What is the effect of this transaction?
A) gain of $9000
B) gain of $6000
C) loss of $6000
D) loss of $9000
21) Tulip Corporation purchased equipment for $58,000 on January 1, 2017. On December 31, 2019, the
equipment was sold for $24,000. Accumulated Depreciation as of December 31, 2019 was $33,000.
Calculate gain or loss on the sale.
A) $1000 gain
B) $1000 loss
C) $33,000 loss
D) no gain, no loss
22) Dynasty Corp sold a truck for $15,000 cash. It was originally purchased for $50,000 and had
accumulated depreciation of $30,000 at the time of sale. Prepare the journal entry for the sale of truck.
Omit explanation.
23) Equipment was purchased for $24,000 on January 1, 2018. The equipment’s estimated useful life was
five years, and its residual value was $4,000. The straight-line method of depreciation was used. Calculate
the gain or loss on sale if the equipment is sold for $18,000 on December 31, 2018, the end of the
accounting period. Prepare the journal entry to record the sale of equipment. Omit explanation.
24) Equipment was purchased for $24,000 on January 1, 2018. The equipment’s estimated useful life was
five years, and its residual value was $4,000. The straight-line method of depreciation was used. Prepare
the journal entry to record the sale of the equipment for $25,000 on January 3, 2019. The company has a
calendar year accounting period. Omit explanation.
25) City Petroleum Products owns furniture that was purchased for $20,000. Accumulated depreciation is
$16,000. The furniture was sold for $3,800. Prepare the journal entry to record this transaction. Omit
explanation.
26) On January 1, 2017, Dennis Supply purchased equipment for $60,000 cash, expecting it to remain in
service for six years. The equipment is depreciated using the straight-line method with $2,000 estimated
residual value. On April 30, 2019, the equipment was sold for $48,000 cash. Record depreciation expense
for 2019 and the sale of the equipment on April 30, 2019. (Round all intermediate calculations to two
decimal places. Round final numbers to nearest dollar.) Omit explanations.
27) On January 2, 2017, Barnes Enterprises purchased equipment for $42,000 cash, expecting the
equipment to remain in service for five years, with a $4,000 residual value. Barnes uses straight-line
depreciation. On April 30, 2019, Barnes sold the equipment for $20,000 cash.
Requirement:
Prepare the journal entries to record the purchase of the equipment; depreciation for 2017, 2018, and 2019;
and the sale of the equipment. Omit explanations and round to the nearest dollar.
1) A natural resource is an asset that comes from the earth and is consumed.
2) The process by which businesses allocate a natural resource’s cost to expense over its usage is known
as depreciation.
3) The units–of-production method is used to compute depletion expense.
4) Depletion expense should not be recorded for natural resources because they do not decrease in value
over time.
5) Which of the following is an expense that results from the usage of a natural resource?
A) depletion
B) amortization
C) depreciation
D) obsolescence
6) A coal mine cost $1,001,000 and is estimated to hold 58,000 tons of coal. There is no residual value.
During the first year of operations, 5000 tons are extracted and sold. Calculate depletion per unit. (Round
your answer to the nearest cent.)
A) $8.63
B) $4.32
C) $17.26
D) $12.94
7) An oil well cost $1,842,500 and is calculated to hold 170,000 barrels of oil. There is no residual value.
Which journal entry is needed to record the expense for the extraction of 35,000 barrels of oil during the
year? All 35,000 barrels were sold during the year. (Round any intermediate calculations to the nearest
cent, and your final answer to the nearest dollar.)
A)
Cost of Goods Sold – Oil Reserve
379,400
Accumulated Depletion – Oil Reserve
379,400
B)
Depletion Expense – Oil Reserve
379,400
Oil Revenue
379,400
C)
Depletion Expense – Oil Reserve
379,400
Accumulated Depletion – Oil Reserve
379,400
D)
Oil Reserve Inventory
379,400
Accumulated Depletion – Oil Reserve
379,400
8) An oil well cost $2,030,000 and is calculated to hold 250,000 barrels of oil. There is no residual value.
Which journal entry is needed to record the expense for the extraction of 55,000 barrels of oil during the
year? All 55,000 barrels were sold during the year. (Round any intermediate calculations to the nearest
cent, and your final answer to the nearest dollar.)
A)
Depletion Expense – Oil Reserve
446,600
Accumulated Depletion – Oil Reserve
446,600
B)
Depletion Expense – Oil Reserve
446,600
Oil Revenue
446,600
C)
Cost of Goods Sold – Oil Reserve
446,600
Accumulated Depletion – Oil Reserve
446,600
D)
Oil Reserve Inventory
446,600
Accumulated Depletion – Oil Reserve
446,600