FINANCIAL ACCOUNTING QUIZ 6 Chapter 9

| March 29, 2017

Question
FINANCIAL ACCOUNTING QUIZ 6

Chapter 9

Information for questions 1-4: On January1, 2009,Town Spa Pizza purchases for $24,000 a delivery truck that will be driven an estimated 120,000 miles. The truck has an estimated useful life of eight years and an estimated salvage value of $6,000. Town Spa’s fiscal year is the calendar year. Calculate the amounts requested below.

1. Depreciation Expense for 2009, under the production method. Assume 17,000 miles were driven in 2009.

a. $3,400 c. $850

b. $2,550 d. $900

2. The total accumulated depreciation after the truck has been used for 6 years, under the straight-line method.

a. $18,000 c. $2,250

b. $13,500 d. $3,000

3. Depreciation Expense for 2011, under the double-declining balance method.

a. $3,375.00 c. $10,125.00

b. $2,531.25 d. $7,593.75

4. Assume the truck was purchased on 3/20/09. The depreciation expense for 2010, under double-declining balance method would be:

a. $4,750.00 c.$3,656.25

b. $5,000.00 d. $4,875.00

5. A company purchases land and a building on the land. The land is appraised at $40,000, and the building at

$80,000. If the cost of the property is $78,000 in total, then the portion of the cost allocable to the land is:

a. $26,000 c. $39,000

b. $52,000 d. $78,000

6. In 2009, J.R. Enterprises purchases an oil well for $600 million. It is estimated that 80 million barrels can be extracted from the well and that the estimated residual value of the well will be $0. Depletion (depreciation) expense during 2010, when 2 million barrels were extracted and sold, totaled:

a. $15,000,000 c. $1,500,000

b. $266,667 d. $2,666,667

7. The Land account would include all of the following costs except:

a. drainage costs. c. commissions paid to real estate agents.

b. the cost of building a parking lot. d. the cost of tearing down a building.

8. Compton Contractors acquired a used storage building that was in poor physical condition due to inadequate maintenance and vandalism. Before placing the building in use,Compton spent several thousand dollars replacing broken windows, painting the building, and installing new support beams. These fix-up expenditures should be recorded by debiting which of the following accounts?

a. Repair Expense c. Building

b. Accumulated Depreciation, Building d. Land Improvements

9. B Company purchased a machine on January 1, 2009 for $5,000. The original estimated useful life was

four years, and an estimated residual value of $0. B Company uses straight-line depreciation. On January

1, 2011 (2 years later), B increases the estimated useful life by three years, but the residual value remains at $0. B Company should now record how much depreciation in 2011?

a. $165 c. $500

b. $333 d. $614

10. The recording of an extraordinary repair will increase the carrying value of the asset repaired.

a. True (THIS IS THE ANSWER!)

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