143) A company bought new heating system for $42,000 and was given a trade-in of $2,000 on
an old heating system, so the company paid $40,000 cash with the trade-in. The old system had
an original cost of $37,000 and accumulated depreciation of $34,000. If the transaction has
commercial substance, the company should record the new heating system at:
A) $2,000.
B) $3,000.
C) $40,000.
D) $42,000.
E) $43,000.
144) A company purchased equipment valued at $66,000. It traded in old equipment for a $9,000
trade-in allowance and the company paid $57,000 cash with the trade-in. The old equipment cost
$44,000 and had accumulated depreciation of $36,000. This transaction has commercial
substance. What is the recorded value of the new equipment?
A) $8,000.
B) $9,000.
C) $57,000.
D) $65,000.
E) $66,000.
145) The cost of equipment might include all of the following except:
A) Assembling cost.
B) Invoice cost.
C) Testing cost.
D) Unpacking damage repair cost.
E) Installing cost.
146) Granite Company purchased a machine costing $120,000, terms 1/10, n/30. The machine
was shipped FOB shipping point and freight charges were $2,000. The machine requires special
mounting and wiring connections costing $10,000. When installing the machine, $1,300 in
damages occurred. Compute the cost recorded for this machine assuming Granite paid within the
discount period.
A) $129,800.
B) $132,100.
C) $130,800.
D) $118,800.
E) $120,100.
147) Wickland Company installs a manufacturing machine in its production facility at the
beginning of the year at a cost of $87,000. The machine’s useful life is estimated to be 5 years, or
400,000 units of product, with a $7,000 salvage value. During its second year, the machine
produces 84,500 units of product. Determine the machines’ second year depreciation under the
straight-line method.
A) $16,900.
B) $16,000.
C) $17,400.
D) $18,379.
E) $20,880.
148) Wickland Company installs a manufacturing machine in its production facility at the
beginning of the year at a cost of $87,000. The machine’s useful life is estimated to be 5 years, or
400,000 units of product, with a $7,000 salvage value. During its second year, the machine
produces 84,500 units of product. Determine the machines’ second year depreciation under the
double-declining-balance method.
A) $16,900.
B) $16,000.
C) $17,400.
D) $18,379.
E) $20,880.
149) Wickland Company installs a manufacturing machine in its production facility at the
beginning of the year at a cost of $87,000. The machine’s useful life is estimated to be 5 years, or
400,000 units of product, with a $7,000 salvage value. During its second year, the machine
produces 84,500 units of product. Determine the machines’ second year depreciation under the
units-of-production method.
A) $16,900.
B) $16,000.
C) $17,400.
D) $18,379.
E) $20,880.
150) Wickland Company installs a manufacturing machine in its production facility at the
beginning of the year at a cost of $87,000. The machine’s useful life is estimated to be 5 years, or
400,000 units of product, with a $7,000 salvage value. During its second year, the machine
produces 84,500 units of product. What journal entry would be needed to record the machines’
second year depreciation under the units-of-production method?
A) Debit Depletion Expense $16,900; credit Accumulated Depletion $16,900.
B) Debit Depletion Expense $16,000; credit Accumulated Depletion $16,000.
C) Debit Depreciation Expense $16,900; credit Accumulated Depreciation $16,900.
D) Debit Depreciation Expense $16,000; credit Accumulated Depreciation $16,000.
E) Debit Amortization Expense $16,900; credit Accumulated Amortization $16,900.
151) Minor Company installs a machine in its factory at the beginning of the year at a cost of
$135,000. The machine’s useful life is estimated to be 5 years, or 300,000 units of product, with
a $15,000 salvage value. During its first year, the machine produces 64,500 units of product.
Determine the machines’ first year depreciation under the straight-line method.
A) $27,000.
B) $29,025.
C) $25,800.
D) $23,779.
E) $24,000.
152) Minor Company installs a machine in its factory at the beginning of the year at a cost of
$135,000. The machine’s useful life is estimated to be 5 years, or 300,000 units of product, with
a $15,000 salvage value. During its first year, the machine produces 64,500 units of product.
Determine the machines’ first year depreciation under the double-declining-balance method.
A) $66,000.
B) $54,000.
C) $24,000.
D) $25,800.
E) $48,000.
153) Minor Company installs a machine in its factory at the beginning of the year at a cost of
$135,000. The machine’s useful life is estimated to be 5 years, or 300,000 units of product, with
a $15,000 salvage value. During its first year, the machine produces 64,500 units of product.
Determine the machines’ first year depreciation under the units-of-production method.
A) $27,000.
B) $54,000.
C) $24,000.
D) $25,800.
E) $48,000.
154) Minor Company installs a machine in its factory at the beginning of the year at a cost of
$135,000. The machine’s useful life is estimated to be 5 years, or 300,000 units of product, with
a $15,000 salvage value. During its first year, the machine produces 64,500 units of product.
What journal entry would be needed to record the machines’ first year depreciation under the
units-of-production method?
A) Debit Depletion Expense $25,800; credit Accumulated Depletion $25,800.
B) Debit Depletion Expense $29,025; credit Accumulated Depletion $29,025.
C) Debit Depreciation Expense $29,025; credit Accumulated Depreciation $29,025.
D) Debit Depreciation Expense $25,800; credit Accumulated Depreciation $25,800.
E) Debit Amortization Expense $24,000; credit Accumulated Amortization $24,000.
155) Fortune Drilling Company acquires a mineral deposit at a cost of $5,900,000. It incurs
additional costs of $600,000 to access the deposit, which is estimated to contain 2,000,000 tons
and is expected to take 5 years to extract. Compute the depletion expense for the first year
assuming 418,000 tons were mined.
A) $1,233,100.
B) $1,358,500.
C) $1,300,000.
D) $1,180,000.
E) $1,280,000.
156) Fortune Drilling Company acquires a mineral deposit at a cost of $5,900,000. It incurs
additional costs of $600,000 to access the deposit, which is estimated to contain 2,000,000 tons
and is expected to take 5 years to extract. What journal entry would be needed to record the
expense for the first year assuming 418,000 tons were mined?
A) Debit Depletion Expense $1,233,100; credit Accumulated Depletion $1,233,100.
B) Debit Amortization Expense $1,358,500; credit Accumulated Amortization $1,358,500.
C) Debit Depreciation Expense $1,358,500; credit Accumulated Depreciation $1,358,500.
D) Debit Depletion Expense $1,358,500; credit Accumulated Depletion $1,358,500.
E) Debit Depreciation Expense $1,233,100; credit Accumulated Depreciation $1,233,100.
157) Bering Rock acquires a granite quarry at a cost of $590,000, which is estimated to contain
200,000 tons of granite and is expected to take 6 years to remove. Compute the depletion
expense for the first year assuming 38,000 tons were removed and sold.
A) $98,333.
B) $93,158.
C) $38,000.
D) $12,881.
E) $112,100.
158) Bering Rock acquires a granite quarry at a cost of $590,000, which is estimated to contain
200,000 tons of granite and is expected to take 6 years to remove. What journal entry would be
needed to record the expense for the first year assuming 38,000 tons were removed and sold?
A) Debit Depletion Expense $112,100; credit Accumulated Depletion $112,100.
B) Debit Amortization Expense $112,100; credit Natural Resources $112,100.
C) Debit Depreciation Expense $93,158; credit Accumulated Depreciation $93,158.
D) Debit Depletion Expense $93,158; credit Accumulated Depletion $93,158.
E) Debit Depreciation Expense $98,333; credit Accumulated Depreciation $98,333.
159) Phoenix Agency leases office space. On January 3, Phoenix incurs $65,000 to improve the
leased office space. These improvements are expected to yield benefits for 8 years. Phoenix has
5 years remaining on its lease. Compute the amount of expense that should be recorded the first
year related to the improvements.
A) $20,000.
B) $6,000.
C) $13,000.
D) $65,000.
E) $8,125.
160) Crestfield leases office space. On January 3, the company incurs $12,000 to improve the
leased office space. These improvements are expected to yield benefits for 10 years. Crestfield
has 4 years remaining on its lease. What journal entry would be needed to record the expense for
the first year related to the improvements?
A) Debit Amortization Expense $1,200; credit Accumulated Amortization-Leasehold
Improvements $1,200.
B) Debit Depletion Expense $3,000; credit Accumulated Depletion $3,000.
C) Debit Depreciation Expense $1,200; credit Accumulated Depreciation $1,200.
D) Debit Depletion Expense $12,000; credit Accumulated Depletion $12,000.
E) Debit Amortization Expense $3,000; credit Accumulated Amortization-Leasehold
Improvements $3,000.
161) Ngu owns equipment that cost $93,500 with accumulated depreciation of $64,000. Ngu
asks $35,000 for the equipment but sells the equipment for $33,000. Compute the amount of gain
or loss on the sale.
A) $3,500 loss.
B) $5,500 gain.
C) $5,500 loss.
D) $3,000 gain.
E) $3,500 gain.
162) Gaston owns equipment that cost $90,500 with accumulated depreciation of $61,000.
Gaston sells the equipment for $26,000. Which of the following would not be part of the journal
entry to record the disposal of the equipment?
A) Debit Accumulated Depreciation $61,000.
B) Credit Equipment $90,500.
C) Debit Loss on Disposal of Equipment $3,500.
D) Credit Gain on Disposal of Equipment $3,500.
E) Debit Cash $26,000.
163) Flask Company reports net sales of $4,315 million; cost of goods sold of $2,808 million;
net income of $283 million; and average total assets of $2,136. Compute its total asset turnover.
A) 1.31
B) 2.02
C) .13
D) .76
E) .50
164) Riverboat Adventures pays $310,000 plus $15,000 in closing costs to buy out a competitor.
The real estate consists of land appraised at $35,000, a building appraised at $105,000, and
paddleboats appraised at $210,000. Compute the cost that should be allocated to the building.
A) $97,500.
B) $105,000.
C) $89,178.
D) $140,000.
E) $93,000.
165) Riverboat Adventures pays $310,000 plus $15,000 in closing costs to buy out a competitor.
The real estate consists of land appraised at $35,000, a building appraised at $105,000, and
paddleboats appraised at $210,000. Compute the cost that should be allocated to the land.
A) $93,000.
B) $140,000.
C) $32,500.
D) $31,000.
E) $97,500.
166) Victory Company purchases office equipment at the beginning of the year at a cost of
$15,000. The machine is depreciated using the straight-line method. The machine’s useful life is
estimated to be 7 years with a $1,000 salvage value. The journal entry to record the first year’s
depreciation is:
A) Debit Depreciation Expense $2,143, credit Accumulated Depreciation $2,143.
B) Debit Depreciation Expense $2,000, credit Office Equipment $2,000.
C) Debit Office Equipment $2,000, credit Accumulated Depreciation $2,000.
D) Debit Accumulated Depreciation $2,143; credit Office Equipment $2,143.
E) Debit Depreciation Expense $2,000, credit Accumulated Depreciation $2,000.
167) Victory Company purchases office equipment at the beginning of the year at a cost of
$15,000. The machine is depreciated using the straight-line method. The machine’s useful life is
estimated to be 7 years with a $1,000 salvage value. The book value at the end of 7 years is:
A) $2,143.
B) $1,000.
C) $2,000.
D) $14,000.
E) $0.
168) Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The
machine is depreciated using the straight-line method. The machine’s useful life is estimated to
be 5 years with a $4,000 salvage value. Depreciation expense in year 2 is:
A) $4,800.
B) $4,000.
C) $9,600.
D) $20,000.
E) $0.
169) Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The
machine is depreciated using the straight-line method. The machine’s useful life is estimated to
be 5 years with a $4,000 salvage value. The book value of the machine at the end of year 2 is:
A) $4,000.
B) $8,000.
C) $12,000.
D) $16,000.
E) $20,000.
170) Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The
machine is depreciated using the double-declining-balance method. The machine’s useful life is
estimated to be 5 years with a $4,000 salvage value. Depreciation expense in year 2 is:
A) $4,800.
B) $8,000.
C) $9,600.
D) $5,760.
E) $14,400.
171) Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The
machine is depreciated using the double-declining-balance method. The machine’s useful life is
estimated to be 5 years with a $4,000 salvage value. The machine’s book value at the end of year
2 is:
A) $12,000.
B) $7,200.
C) $9,600.
D) $8,640.
E) $14,400.
172) Mohr Company purchases a machine at the beginning of the year at a cost of $24,000. The
machine is depreciated using the units-of-production method. The company estimates it will use
the machine for 5 years, during which time it anticipates producing 40,000 units. The machine is
estimated to have a $4,000 salvage value. The company produces 9,000 units in year 1 and 6,000
units in year 2. Depreciation expense in year 2 is:
A) $4,000.
B) $4,500.
C) $9,600.
D) $3,000.
E) $14,400.
173) Martin Company purchases a machine at the beginning of the year at a cost of $60,000. The
machine is depreciated using the straight-line method. The machine’s useful life is estimated to
be 4 years with a $5,000 salvage value. Depreciation expense in year 4 is:
A) $15,000.
B) $13,750.
C) $55,000.
D) $60,000.
E) $0.
174) Martin Company purchases a machine at the beginning of the year at a cost of $60,000. The
machine is depreciated using the straight-line method. The machine’s useful life is estimated to
be 4 years with a $5,000 salvage value. The book value of the machine at the end of year 4 is:
A) $13,750.
B) $55,000.
C) $30,000.
D) $5,000.
E) $0.
175) Martin Company purchases a machine at the beginning of the year at a cost of $60,000. The
machine is depreciated using the double-declining-balance method. The machine’s useful life is
estimated to be 4 years with a $5,000 salvage value. Depreciation expense in year 4 is:
A) $13,750.
B) $3,750.
C) $30,000.
D) $2,500.
E) $5,000.
176) Martin Company purchases a machine at the beginning of the year at a cost of $60,000. The
machine is depreciated using the double-declining-balance method. The machine’s useful life is
estimated to be 4 years with a $5,000 salvage value. The machine’s book value at the end of year
3 is:
A) $30,000.
B) $45,000.
C) $52,500.
D) $7,500.
E) $6,875.