# ACCOUNTING

104. A depreciation method in which a plant asset’s depreciation expense for a period is determined by applying a constant depreciation rate to the asset’s beginning-of-period book value is called:
A. Book value depreciation.
B. Declining-balance depreciation.
C. Straight-line depreciation.
D. Units-of-production depreciation.
E. Modified accelerated cost recovery system (MACRS) depreciation.

105. A depreciation method that produces larger depreciation expense during the early years of an asset’s life and smaller expense in the later years is a (an):
A. Accelerated depreciation method.
B. Book value depreciation method.
C. Straight-line depreciation method.
D. Units-of-production depreciation method.
E. Unrealized depreciation method.

106. A company purchased a delivery van for \$23,000 with a salvage value of \$3,000 on September 1, 2008. It has an estimated useful life of 5 years. Using the straight-line method, how much depreciation expense should the company recognize on December 31, 2008?
A. \$1,000.
B. \$1,333.
C. \$1,533.
D. \$4,000.
E. \$4,600.

107. A company purchased a cash register on January 1 for \$5,400. This register has a useful life of 10 years and a salvage value of \$400. What would be the depreciation expense for the second-year of its useful life using the double-declining-balance method?
A. \$ 500.
B. \$ 800.
C. \$ 864.
D. \$1,000.
E. \$1,080.

108. A company purchased a rope braiding machine for \$190,000. The machine has a useful life of 8 years and a residual value of \$10,000. It is estimated that the machine could produce 750,000 units of climbing rope over its useful life. In the first year, 105,000 units were produced. In the second year, production increased to 109,000 units. Using the units-of-production method, what is the amount of depreciation that should be recorded for the second year?
A. \$25,200.
B. \$26,160.
C. \$26,660.
D. \$27,613.
E. \$53,160.

109. Revenue expenditures:
A. Are additional costs of plant assets that do not materially increase the asset’s life or its productive capabilities.
B. Are known as balance sheet expenditures.
C. Extend the asset’s useful life.
D. Substantially benefit future periods.
E. Are debited to asset accounts.

110. Another name for a capital expenditure is:
A. Revenue expenditure.
B. Asset expenditure.
C. Long-term expenditure.
D. Contributed capital expenditure.
E. Balance sheet expenditure.

111. Extraordinary repairs:
A. Are revenue expenditures.
B. Extend an asset’s useful life beyond its original estimate.
C. Are credited to accumulated depreciation.
D. Are additional costs of plants assets that do not materially increase the asset’s life.
E. Are expensed as incurred.

112. Ordinary repairs:
A. Are expenditures to keep an asset in normal operating condition.
B. Are necessary if an asset is to perform to expectations over its useful life.
C. Are treated as expenses.
D. Include cleaning, lubricating, and normal adjusting.
E. All of these.

113. Betterments:
A. Are expenditures making a plant asset more efficient or productive.
B. Are also called improvements.
C. Do not always increase an asset’s life.
D. Are capital expenditures.
E. All of these.

114. An asset’s book value is \$18,000 on June 30, 2008. The asset is being depreciated at an annual rate of \$3,000 on the straight-line method. Assuming the asset is sold on December 31, 2009 for \$15,000, the company should record:
A. A loss on sale of \$1,500.
B. A gain on sale of \$1,500.
C. Neither a gain nor a loss is recognized on this type of transaction.
D. A gain on sale of \$3,000.
E. A loss on sale of \$3,000.

115. An asset’s book value is \$36,000 on January 1, 2008. The asset is being depreciated \$500 per month using the straight-line method. Assuming the asset is sold on July 1, 2009 for \$25,000, the company should record:
A. Neither a gain or loss is recognized on this type of transaction.
B. A gain on sale of \$2,000.
C. A loss on sale of \$1,000.
D. A gain on sale of \$1,000.
E. A loss on sale of \$2,000.

116. Information on a depreciable asset owned by Wilson Engineering is as follows: If the asset is sold on July 1, 2012 for \$20,000, the journal entry to record the sale will include:
A. A credit to cash for \$20,000.
B. A debit to accumulated depreciation for \$22,500.
C. A debit to loss on sale for \$10,000.
D. A credit to loss on sale for \$10,000.
E. A debit to gain on sale for \$2,500.

117. Information on a depreciable asset is as follows: If the asset is sold on January 1, 2011 for \$13,000, the journal entry to record the sale will include:
A. A credit to gain on sale for \$8,000.
B. A debit to loss on sale for \$2,625.
C. A credit to accumulated depreciation for \$59,375.
D. A debit to loss on sale for \$3,042.
E. A credit to gain on sale for \$4,979.

118. An asset can be disposed of by:
B. Selling it.
C. Exchanging it for another asset.
D. Donating it to charity.
E. All of these.

119. A company sold a machine that originally cost \$100,000 for \$60,000 cash. The accumulated depreciation on the machine was \$40,000. The company should recognize a:
A. \$0 gain or loss.
B. \$20,000 gain.
C. \$20,000 loss.
D. \$40,000 loss.
E. \$60,000 gain.

120. A company discarded a display case originally purchased for \$8,000. The accumulated depreciation was \$7,200. The company should recognize a (an):
A. \$0 gain or loss.
B. \$800 loss.
C. \$800 gain.
D. \$8,000 loss.
E. \$7,200 loss.

121. A company had a bulldozer destroyed by fire. The bulldozer originally cost \$125,000 with accumulated depreciation of \$60,000. The proceeds from the insurance company were \$90,000. The company should recognize:
A. A loss of \$25,000.
B. A gain of \$25,000.
C. A loss of \$65,000.
D. A gain of \$65,000.
E. A gain of \$90,000.

122. Natural resources:
A. Include standing timber, mineral deposits, and oil and gas fields.
B. Are also called wasting assets.
C. Are long-term assets.
D. Are depleted.
E. All of these.

123. Depletion:
A. Is the process of allocating the cost of natural resources to periods in which they are consumed.
B. Is also called depreciation.
C. Is also called amortization.
D. Is an unrealized expense reported in equity.
E. Is the process of allocating the cost of intangibles to periods in which they are used.

124. A company purchased a tract of land for its natural resources at a cost of \$1,500,000. It expects to mine 2,000,000 tons of ore from this land. The salvage value of the land is expected to be \$250,000. The depletion expense per ton of ore is:
A. \$0.75.
B. \$0.625.
C. \$0.875.
D. \$6.00.
E. \$8.00.

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