Question :
31. ABC and XYZ Companies purchased identical equipment having an estimated : 1224940
31. ABC and XYZ Companies purchased identical equipment having an estimated useful life of ten years. ABC uses the straight-line depreciation method and XYZ uses the double-declining-balance method of depreciation. Assuming the two entities are similar in all other respects, which of the following statements is correct?
A. ABC’s depreciation expense will be greater in the second year than XYZ’s depreciation expense.
B. XYZ’s book value will be greater than ABC’s book value at the end of year one.
C. ABC’s net income will be greater than XYZ’s net income in year nine.
D. XYZ’s book value will be less than ABC’s book value at the end of year two.
32. Using the straight-line depreciation method will cause a company to incur ____ tax expense in the early years of an asset’s life than they would experience using an accelerated method of depreciation.
A. more
B. less
C. equal
D. no
33. Gump Shrimp Company
On January 1, 2011, Gump Shrimp Company purchased a ship for $1,000,000. It has a ten-year useful life and a salvage value of $100,000. The company uses the double-declining-balance method.
Refer to the information provided for Gump Shrimp Company. What was the depreciation expense for Gump Shrimp for the year ended December 31, 2011?
A. $ 90,000
B. $100,000
C. $180,000
D. $200,000
34. Gump Shrimp Company
On January 1, 2011, Gump Shrimp Company purchased a ship for $1,000,000. It has a ten-year useful life and a salvage value of $100,000. The company uses the double-declining-balance method.
Refer to the information provided for Gump Shrimp Company. What was the depreciation expense for Gump Shrimp for the year ended December 31, 2012?
A. $ -0-
B. $180,000
C. $160,000
D. $200,000
35. Gump Shrimp Company
On January 1, 2011, Gump Shrimp Company purchased a ship for $1,000,000. It has a ten-year useful life and a salvage value of $100,000. The company uses the double-declining-balance method.
Refer to the information provided for Gump Shrimp Company. What would be the book value of the ship after ten years?
A. $200,000
B. $400,000
C. $ 0
D. $100,000
36. Gump Shrimp Company
On January 1, 2011, Gump Shrimp Company purchased a ship for $1,000,000. It has a ten-year useful life and a salvage value of $100,000. The company uses the double-declining-balance method.
Refer to the information provided for Gump Shrimp Company. What was the book value of the ship at the end of the third year?
A. $128,000
B. $512,000
C. $200,000
D. Need more information to determine this answer.
37. All of the following below are needed for the calculation of straight-line depreciation except:
A. cost.
B. salvage value.
C. useful life.
D. units produced.
38. A machine with a cost of $80,000 has an estimated salvage value of $5,000 and an estimated life of 5 years or 15,000 hours. It is to be depreciated by the units-of-activity method. What is the amount of depreciation for the second full year, during which the machine was used for 5,000 hours?
A. $5,000
B. $25,000
C. $15,000
D. $26,667
39. The depreciation method that does not use salvage value in calculating the first year’s depreciation expense is:
A. straight-line method
B. units-of-activity method
C. double-declining-balance method
D. straight-line method and units-of-activity method
40. Capitalizing an expenditure rather than recording it as a revenue expenditure:
A. impacts the total book value of plant assets reported on the balance sheet and the amount of net income reported during a period.
B. impacts the total book value of plant assets on the balance sheet, but has no effect on the amount of net income reported during an accounting period.
C. impacts the amount of net income reported during an accounting period, but has no effect on the total book value of plant assets on the balance sheet.
D. has no impact on the book value of plant assets on the balance sheet or the amount of income reported on the income statement.
