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