Chapter 16 - Recording and Evaluating Capital Resource Process Activities: Investing
Chapter 16
Recording and Evaluating Capital Resource Process Activities: Investing
Name ______
Team ______
Test/Retest #16B
1.ABC Company purchased land and a building for a total cost of $5 million. An appraisal of the property indicates an estimated value of the land at $4.5 million while the building is appraised at $1.5 million. Based on this information, the debit to land to record this purchase should be:
a.$1,500,000
b.$3,750,000
c.$4,500,000
d.$5,000,000
Use the following information to answer questions 2 – 5. On January 2, XYZ Company purchased equipment with a total cost of $110,000 and paid $20,000 to install it. The equipment has an estimated useful life of 8 years or 360,000 hours with a $10,000 salvage value.
2.If the company uses the straight-line depreciation method, what is the debit to Depreciation Expense for the first year?
a.$6,250
b.$7,500
c.$12,500
d.$15,000
3.If the company uses the units-of-production methods and uses the equipment for 40,000 hours during the first year, what is the credit to Accumulated Depreciation?
a.$12,222
b.$13,333
c.$14,444
d.$120,000
4.If the company uses the double-declining-balance method, what is the debit to Depreciation Expense for the first year?
a.$7,500
b.$27,500
c.$30,000
d.$32,500
5.If the company had purchased the equipment on April 16, adopted the mid-year convention, and used the units-of-production method but still used the equipment for 40,000 hours, what would the depreciation expense be?
a.$6,667
b.$7,222
c.$13,333
d.$14,444
Use the following information to answer questions 6 – 8. Example Company has a machine with an original cost of $76,000 and accumulated depreciation of $40,000.
6.If Example Company sells the machine for $45,000 cash, what is the amount of the recognized gain or loss?
a.$9,000 gain
b.$9,000 loss
c.$31,000 loss
d.$0, a gain cannot be recognized in a cash transaction
7.If Example Company trades the machine for $10,000 of inventory and a $20,000 delivery vehicle, what is the amount of the recognized gain or loss?
a.$6,000 gain
b.$6,000 loss
c.$36,000 loss
d.$0, a loss cannot be recognized
8.If Example Company trades the machine for a newer machine with a list price of $110,000 and the dealer gives Example Company a trade-in allowance of $50,000, what is the amount of the recognized gain or loss?
a.$24,000 gain
b.$24,000 loss
c.$14,000 gain
d.$0, a gain cannot be recognized
9.R&D Company spent $240,000 to secure a patent for its new product. The legal life of the patent is 20 years, but R&D estimates its useful life at 8 years. What is the amortization expense for the first year?
a.$12,000
b.$24,000
c.$30,000
d.Cannot be determined without knowing the method of amortization
10.WYO, Inc. has a coal mine with a cost of $4,000,000. It is expected to yield 2,000,000 tons of coal over its lifetime. What is the depletion rate?
a.$0.50 per ton
b.$2.00 per ton
c.It depends on how many tons are mined per period.
16B-1