Question :
8.5 Questions
1) Disposal of a plant asset always occurs after : 1232330
8.5 Questions
1) Disposal of a plant asset always occurs after the asset has been fully depreciated.
2) When an asset is disposed of, the current period’s depreciation expense account must be updated to the time of the disposal.
3) The first step in recording a disposal transaction is to figure the gain or loss on the disposal.
4) GAAP requires that exchanges of assets must be categorized as like-kind or dissimilar assets.
5) If an exchange of assets lacks commercial substance, then no gain or loss on the exchange is recognized.
6) A truck costing $56,000 has accumulated depreciation of $50,000. The truck is scrapped for $500. The journal entry to record this transaction is to:
A) debit Cash for $500, debit Truck for $50,000, debit Loss on Disposal for $5,500 and credit Accumulated Depreciation – Truck for $56,000.
B) debit Cash for $500, debit Accumulated Depreciation – Truck for $50,000, debit Loss on Disposal for $5,500 and credit Truck for $56,000.
C) debit Accumulated Depreciation – Truck for $50,000, debit Loss on Disposal $6,000, and credit Truck for $56,000.
D) debit Cash for $500, debit Loss on Disposal for $55,500 and credit Truck for $56,000.
7) A truck costing $56,000 has accumulated depreciation of $50,000. The truck is scrapped for $0. The journal entry to record this transaction is to:
A) debit Truck for $50,000, debit Loss on Disposal for $6,000 and credit Accumulated Depreciation – Truck for $56,000.
B) debit Accumulated Depreciation – Truck for $50,000, and credit Truck for $50,000.
C) debit Accumulated Depreciation – Truck for $50,000, debit Loss on Disposal $6,000, and credit Truck for $56,000.
D) debit Truck for $56,000, credit Accumulated Depreciation – Truck for $50,000 and credit Gain on Disposal for $6,000.
8) A truck costing $56,000 has accumulated depreciation of $50,000. The truck is sold for $8,500. The journal entry to record this transaction is to:
A) debit Cash for $8,500, debit Accumulated Depreciation – Truck for $50,000, credit Truck for $56,000, and credit Gain on Disposal for $2,500.
B) debit Accumulated Depreciation – Truck for $50,000, and credit Truck for $50,000.
C) debit Cash for $8,500, debit Truck for $56,000, credit Accumulated Depreciation – Truck for $50,000 and credit Gain on Disposal for $14,500.
D) debit Cash for $2,500, debit Truck for $56,000, credit Accumulated Depreciation – Truck for $50,000, and credit Gain on Disposal for $8,500.
9) Which of the following accounts would be debited in a journal entry for an asset exchange?
A) Accumulated Depreciation–Old Truck
B) Old Truck
C) Gain on Exchange of Assets
D) Notes Payable
10) Which of the following accounts would be credited in a journal entry for an asset exchange?
A) Accumulated Depreciation–Old Truck
B) Truck (Old)
C) Loss on Exchange of Assets
D) Truck (New)
11) Which of the following might be debited as part of what you got in a transaction involving an exchange of assets?
A) Old machine
B) Cash
C) Accumulated depreciation
D) Gain on exchange
12) If an asset is being sold or exchanged, the gain or loss is always computed by comparing the:
A) market value and book value.
B) market value and salvage value.
C) book value and salvage value.
D) market value and cost.
13) Equipment costing $118,000 has accumulated depreciation of $92,000. The equipment is a trade-in for new equipment costing $187,000. If the trade-in value received for the old equipment is $30,000, the journal entry to record this transaction is to:
A) debit Equipment (New) for $187,000, debit Accumulated Depreciation – Equipment for $92,000, credit Equipment (Old) for $118,000 and credit Cash for $161,000.
B) debit Equipment (New) for $187,000, debit Accumulated Depreciation – Equipment for $92,000, credit Equipment (Old) for $118,000, credit Cash for $157,000, and credit Gain on Exchange of Assets for $4,000.
C) debit Equipment (New) for $187,000, debit Accumulated Depreciation – Equipment for $92,000, debit Loss on Exchange of Assets for $26,000, credit Equipment (Old) for $118,000 and credit Cash for $187,000.
D) debit Equipment (New) for $187,000, and credit Cash for $187,000.
14) Equipment costing $118,000 has accumulated depreciation of $92,000. The equipment is a trade-in for new equipment costing $187,000. If the trade-in value received for the old equipment is $20,000, the journal entry to record this transaction is to:
A) debit Equipment (New) for $187,000, and credit Cash for $187,000.
B) debit Equipment (New) for $187,000, debit Accumulated Depreciation – Equipment for $92,000, credit Equipment (Old) for $118,000 and credit Cash for $161,000.
C) debit Equipment (New) for $187,000, debit Accumulated Depreciation – Equipment for $92,000, debit Loss on Exchange of Assets for $26,000, credit Equipment (Old) for $118,000, credit Cash for $187,000.
D) debit Equipment (New) for $187,000, debit Accumulated Depreciation – Equipment for $92,000, debit Loss on Exchange of Assets for $6,000, credit Equipment (Old) for $118,000 and credit Cash for $167,000.
