Question : 121. A firm purchased an office machine for $18,400, estimated that : 1245650

121. A firm purchased an office machine for $18,400, estimated that it will use the machine for 15 years, and estimated a salvage value of $400. On December 31 of the sixth year, before closing the books for the year, the firm analyzed its estimates of useful life and salvage value. In light of new information, the firm estimated that the machine will have a total useful life of only 10 years, and the salvage estimate of $400 remains reasonable.

The new estimate of the remaining life is five years (the year just ended plus the next four). The depreciation entry on December 31 of the sixth year and each year thereafter is:  
A. Depreciation Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1,200  
    Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,200
B. Depreciation Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  2,400  
    Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2,400
C. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,200 
    Depreciation Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1,200  
D. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . .2,400 
    Depreciation Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  2,400 
E. none of the above

122. A firm purchased an office machine for $4,600, estimated that it will use the machine for 15 years, and estimated a salvage value of $100. On December 31 of the sixth year, before closing the books for the year, the firm analyzed its estimates of useful life and salvage value. In light of new information, the firm estimated that the machine will have a total useful life of only 10 years, and the salvage estimate of $100 remains reasonable.

The new estimate of the remaining life is five years (the year just ended plus the next four). The depreciation entry on December 31 of the sixth year and each year thereafter is:  
A. Depreciation Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  300  
    Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .300
B. Depreciation Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  600  
    Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .600
C. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . .300 
    Depreciation Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  300  
D. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . .600 
    Depreciation Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  600 
E. none of the above

123. In Year 1, a firm purchased a truck for $12,000. The estimated salvage value was $2,000 and the estimated useful life was 10 years. In Year 4, it was determined that the salvage value would only be $1,000 and that the truck would have a total estimated useful life of 7 years rather than 10. Assuming the straight-line method is used, what is the depreciation expense for Year 4 of the truck? 
A. $1,000
B. $1,750
C. $1,950
D. $2,000
E. $2,250

124. Assume a firm has acquired an asset for $100,000 on January 1, Year 1. The asset has a 6-year life and a salvage value of $10,000. The firm calculates the depreciation expense using the straight-line depreciation.  What was the depreciation for Year 4? 
A.  $10,000
B.  $15,000
C.  $20,000
D.  $25,000
E.  $30,000

125. Regarding a firm that abandons an asset, 
A. there is usually no market for the asset.
B. the book value of an abandoned asset is eliminated from the balance sheet.
C. the firm recognizes a loss in an amount equal to the book value of the abandoned asset in the period that the asset is abandoned.
D. all of the above
E. none of the above

126. Chen Company

Chen Company office equipment costs $10,000, has an expected life of four years and a salvage value of $400. The firm has depreciated this asset on a straight-line basis. The firm has recorded depreciation for two years and then sells the equipment at midyear in the third year.

What is the entry to record depreciation charges up to the date of sale for Chen Company? 
A. Depreciation Expense  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200    
   Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200
B. Depreciation Expense  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400    
   Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400
C. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200
   Depreciation Expense  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200    
D. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400
   Depreciation Expense  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400    
E. Salvage Value   . . . .  . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200    
   Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200

127. Chen Company

Chen Company office equipment costs $10,000, has an expected life of four years and a salvage value of $400. The firm has depreciated this asset on a straight-line basis. The firm has recorded depreciation for two years and then sells the equipment at midyear in the third year.

If the Chen Company sells the equipment for $4,000 cash, the entry to record the sale would be as follows:  
A. Cash . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . .4,000 
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  6,000 
   Equipment   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . .  10,000 
B. Cash . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . .6,000 
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4,000 
   Equipment   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . .  10,000 
C. Equipment   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10,000
   Cash . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . .    4,000 
   Accumulated Depreciation .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000 
D. Equipment   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10,000
   Cash . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . .    6,000 
   Accumulated Depreciation .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000 
E. Equipment   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10,000
   Cash . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . .   6,000 
   Salvage Value  .  .  .  .  .  .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4,000

128. Chen Company

Chen Company office equipment costs $10,000, has an expected life of four years and a salvage value of $400. The firm has depreciated this asset on a straight-line basis. The firm has recorded depreciation for two years and then sells the equipment at midyear in the third year.

If the Chen Company sells the equipment for $4,600 cash, the entry to record the sale would be as follows:  
A. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   4,600
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6,000
   Equipment  . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . 10,000
   Gain on Sale of Equipment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . .  600
B. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   4,600
Salvage Value  . .   . .   . .   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
   Equipment  . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . 10,000
   Gain on Sale of Equipment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . .  600
C. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   4,600
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6,000
   Equipment  . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . 10,000
   Salvage Value  . . .  . .  . .  . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . .  600
D. Equipment  . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . .  10,000
Gain on Sale of Equipment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . 600
   Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . .     4,600
   Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . .6,000
E. Equipment  . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . .  10,000
Salvage Value  . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . .  600
   Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . .     4,600
   Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . .6,000

129. Chen Company

Chen Company office equipment costs $10,000, has an expected life of four years and a salvage value of $400. The firm has depreciated this asset on a straight-line basis. The firm has recorded depreciation for two years and then sells the equipment at midyear in the third year.

If the Chen Company sells the equipment for $3,000 cash, the entry to record the sale would be as follows:  
A. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3,000
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6,000
Loss on Sale of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,000
   Equipment  . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . 10,000
B. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3,000
Salvage Value  . .   . .   . .   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
Loss on Sale of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000     
   Equipment  . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . 10,000
C. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3,000
Salvage Value  . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6,000
Loss on Sale of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000       
   Equipment  . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . 10,000
D. Equipment  . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . .  10,000
   Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . .   3,000
   Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . .6,000
   Loss on Sale of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000  
E. Equipment  . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . .  10,000
   Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . .   3,000
   Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . .6,000
   Loss on Sale of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000

130. Under U.S. GAAP and IFRS, the firm measures the assets and liabilities of a discontinued operation at the lower of their _____  It reports any gain or loss that results in the Discontinued Operations section of the income statement. The Discontinued Operations section also includes income or loss from operating the unit for that year. Financial statements for prior years included for comparative purposes classify those amounts also as a discontinued operation.  
A. carrying values or their fair values.
B. net realizable values or their fair values.
C. carrying values or the present value of future cash flows.
D. net realizable values or the present value of future cash flows.
E. liquidation values or the present value of future cash flows.