Question :
107.Betterments are:
A.Expenditures making a plant asset more efficient or : 1258929
107.Betterments are:
A.Expenditures making a plant asset more efficient or productive.
B.Also called ordinary repairs.
C.Always increase an asset’s life.
D.Revenue expenditures.
E.Credited against the asset account when incurred.
108.An asset’s book value is $18,000 on December 31, Year 5. The asset has been depreciated at an annual rate of $3,000 on the straight-line method. Assuming the asset is sold on December 31, Year 5 for $15,000, the company should record:
A.A loss on sale of $12,000.
B.A gain on sale of $12,000.
C.Neither a gain nor a loss is recognized on this transaction.
D.A gain on sale of $3,000.
E.A loss on sale of $3,000.
Selling price $15,000 – $18,000 Book value = $3,000 Loss.
109.Martinez owns an asset that cost $87,000 with accumulated depreciation of $40,000. The company sells the equipment for cash of $42,000. At the time of sale, the company should record:
A.A gain on sale of $2,000.
B.A loss on sale of $2,000.
C.A loss on sale of $5,000.
D.A gain on sale of $5,000.
E.A loss on sale of $45,000.
Selling price $42,000 – Book value ($87,000 – $40,000) = $5,000 loss.
110.Martinez owns machinery that cost $87,000 with accumulated depreciation of $40,000. The company sells the machinery for cash of $42,000. The journal entry to record the sale would include:
A.A credit to Accumulated Depreciation of $40,000.
B.A credit to Gain on Sale of $2,000.
C.A credit to Machinery of $47,000.
D.A debit to Cash of $42,000.
E.A debit to Accumulated Depreciation of $47,000.
Selling price $42,000 – Book value ($87,000 – $40,000) = $5,000 Loss.
111.An asset’s book value is $36,000 on January 1, Year 6. The asset is being depreciated $500 per month using the straight-line method. Assuming the asset is sold on July 1, Year 7 for $25,000, the company should record:
A.Neither a gain or loss is recognized on this type of transaction.
B.A gain on sale of $2,000.
C.A loss on sale of $1,000.
D.A gain on sale of $1,000.
E.A loss on sale of $2,000.
If the asset’s book value is $36,000 on January 1, Year 6 and is being depreciated $500 per month, $9,000 (18 × $500) of additional depreciation expense would be recognized by July 1, Year 7. Thus, the asset’s book value on that date would be $27,000. If the asset is sold for $25,000, a loss on sale of $2,000 should be recognized.
112.Marks Consulting purchased equipment costing $45,000 on January 1, Year 1. The equipment is estimated to have a salvage value of $5,000 and an estimated useful life of 8 years. Straight-line depreciation is used. If the equipment is sold on July 1, Year 5 for $20,000, the journal entry to record the sale will include a:
A.Credit to cash for $20,000.
B.Debit to accumulated depreciation for $22,500.
C.Debit to loss on sale for $10,000.
D.Credit to loss on sale for $10,000.
E.Debit to gain on sale for $2,500.
Annual depreciation is $5,000 [($45,000 – $5,000)/8 years]. On July 1, Year 5, the asset will have been depreciated for 4.5 years for a total of $22,500. The resulting book value on that date will be $22,500. The journal entry to record the sale of the asset would be as follows:
Cash20,000
Accumulated Depreciation22,500
Loss on Sale2,500
Equipment45,000
113.A machine costing $75,000 is purchased on September 1, Year 1. The machine is estimated to have a salvage value of $10,000 and an estimated useful life of 4 years. Double-declining-balance depreciation is used. If the machine is sold on December 31, Year 3 for $13,000, the journal entry to record the sale will include:
A.A credit to gain on sale for $8,000.
B.A debit to loss on sale for $2,625.
C.A credit to accumulated depreciation for $59,375.
D.A debit to loss on sale for $3,042.
E.A credit to gain on sale for $4,979.
PeriodBOY BVDB RateDepreciation ExpenseEOY BV
Year 1$75,00050%37,500 × 4/12 = $12,500$62,500
Year 262,50050%31,25031,250
Year 331,25050%15,62515,625
Accumulated depreciation$59,375
Therefore, the journal entry to record the sale of the machine would be as follows:
Cash13,000
Acc. Depreciation59,375
Loss on Sale2,625
Machine75,000
BOY BV = Beginning of the year book value DB Rate = Declining-balance rate of depreciation (100%/4) * 2 EOY BV = End of the year book value
114.An asset can be disposed of by all of the following except:
A.Discarding it.
B.Selling it.
C.Exchanging it for another asset.
D.Donating it to charity.
E.Continuing to use it after it is fully depreciated.
115.A company sold equipment that originally cost $100,000 for $60,000 cash. The accumulated depreciation on the equipment was $40,000. The company should recognize a:
A.$0 gain or loss.
B.$20,000 gain.
C.$20,000 loss.
D.$40,000 loss.
E.$60,000 gain.
Cost of equipment$100,000
Accumulated depreciation(40,000)
Book value$60,000
Cash received(60,000)
Gain or Loss on sale$0
116.A company discarded a computer system originally purchased for $18,000. The accumulated depreciation was $17,200. The company should recognize a(an):
A.$0 gain or loss.
B.$800 loss.
C.$800 gain.
D.$8,000 loss.
E.$7,200 loss.
Cost of computer system$18,000
Accumulated depreciation(17,200)
Book value$800
Cash received(0)
Loss on disposal$800
