Quiz 7

1. A company purchased a machine for $203,000 on October 1, 2021. The estimated service life is 10 years with a $19,300 residual value. The company records partial-year depreciation based on the number of months in service. Depreciation expense for the year ended December 31, 2021, using straight-line depreciation, is: (Do not round your intermediate calculations. Round your answer to the nearest dollar amount)

$5,075.

$4,318.

$15,225.

$4,593.

2.  Berry Co. purchases a patent on January 1, 2021, for $32,000 and the patent has an expected useful life of five years with no residual value. Assuming Berry Co. uses the straight-line method, what is the carrying value of the patent on December 31, 2022?

$22,800.

$19,200.

$16,200.

$29,200.

3  Kansas Enterprises purchased equipment for $75,000 on January 1, 2021. The equipment is expected to have a ten-year service life, with a residual value of $6,900 at the end of ten years.
 
Using the straight-line method, depreciation expense for 2022 and the book value at December 31, 2022, would be:

$6,810 and $54,480.

$7,500 and $53,100.

$7,500 and $60,000.

$6,810 and $61,380.

4. A company purchased a computer system at a cost of $31,000. The estimated useful life is 6 years, and the estimated residual value is $2,000. Assuming the company uses the double-declining-balance method, what is the depreciation expense for the second year? (Do not round your intermediate calculations. Round your answer to the nearest whole dollar amount.)

Multiple Choice

$6,889.

$9,139

$6,139.

$8,389.

5.  A company purchased a commercial dishwasher by paying cash of $4,500. The dishwasher’s fair value on the date of the purchase was $4,850. The company incurred $490 in transportation costs, $260 installation fees, and paid a $200 fine for illegal parking while the dishwasher was being delivered. For what amount will the company record the dishwasher?

$4,850.

$5,450.

$5,600.

$5,250.

6.  A company purchased new equipment for $45,000. The company paid cash for the equipment. Other costs associated with the equipment were: transportation costs, $1,200; sales tax paid $2,700; and installation cost, $2,000. The cost recorded for the equipment was:

$50,900.

$48,900.

$45,000.

$46,200.

7.  Kansas Enterprises purchased equipment for $73,000 on January 1, 2021. The equipment is expected to have a ten-year service life, with a residual value of $8,550 at the end of ten years.
 
Using the double-declining balance method, depreciation expense for 2022 would be: (Do not round your intermediate calculations)

$14,600.

$11,680.

$12,890.

$10,312.

8.   The balance sheet of Hidden Valley Farms reports total assets of $800,000 and $1,000,000 at the beginning and end of the year, respectively. The return on assets for the year is 15%.

What is Hidden Valley’s net income for the year?

$6,666,667.

$6,000,000.

$135,000.

$150,000.

9   Kansas Enterprises purchased equipment for $79,000 on January 1, 2021. The equipment is expected to have a five-year service life, with a residual value of $7,200 at the end of five years.
 
Using the straight-line method, the book value at December 31, 2021, would be:

$63,200.

$71,800.

$64,640.

$57,440.

10.   Kansas Enterprises purchased equipment for $78,000 on January 1, 2021. The equipment is expected to have a five-year life, with a residual value of $6,900 at the end of five years.
 
Using the double-declining balance method, the book value at December 31, 2022, would be: (Do not round your intermediate calculations)

$42,160.

$15,600.

$44,560.

$28,080.

Quiz 7 Answers

1. A company purchased a machine for $203,000 on October 1, 2021. The estimated service life is 10 years with a $19,300 residual value. The company records partial-year depreciation based on the number of months in service. Depreciation expense for the year ended December 31, 2021, using straight-line depreciation, is: (Do not round your intermediate calculations. Round your answer to the nearest dollar amount)

$5,075.

$4,318.

$15,225.

$4,593.

Answer:   $4,593.