Question : 69.If the original expected life remained the same (i.e., 5-years), : 1254522

69.If the original expected life remained the same (i.e., 5-years), but at the beginning of 2016, the salvage value was revised to $4,000, the annual depreciation expense for each of the remaining years would be:   

A. $2,720.

B. $13,600.

C. $7,400.

D. $6,800.

41,000 cost – $2,000 salvage value)/5 years = $7,800 original annual depreciation; $41,000 – ($7,800 x 3 years) = $17,600 book value at the time of revision;($17,600 book value – $4,000 revised salvage value)/2 years of remaining useful life = $6,800 new annual depreciation

70.On January 1, 2013 Ballard Company spent $6,000 on an asset to improve its quality. The asset had been purchased on January 1, 2012 for $26,000. The asset had a $2,000 salvage value and a 6-year life. Ballard uses straight-line depreciation. What would be the book value of the asset on January 1, 2016?   

A. $12,000.

B. $10,400.

C. $5,200.

D. $12,400.

71.Allen Company paid cash to prolong the life of one of its assets. Which of the following choices accurately reflects how this event would affect Allen’s financial statements?     

A. Option A

B. Option B

C. Option C

D. Option D

72.On January 1, 2013, Owens Company spent $850 on a plant asset to improve its quality. The asset had been purchased on January 1, 2010 for $4,200 and had an estimated salvage value of $600 and a useful life of five years. Owens uses the straight-line depreciation method. Which of the following correctly shows the effects of the 2013 expenditure on the financial statements?     

A. Option A

B. Option B

C. Option C

D. Option D

73.On January 1, 2013 Brewer Company paid $14,000 cash to extend the useful life of a machine. Which of the following general journal entries would be required to recognize this expenditure?   

A. 

B. 

C. 

D. 

74.On January 1, 2012 Eastwood Company purchased an asset that had cost $48,000. The asset had a 8-year useful life and an estimated salvage value of $2,000. Eastwood depreciates its assets on the straight-line basis. On January 1, 2016 the company spent $12,000 to improve the quality of the asset. Based on this information, the recognition of depreciation expense in 2016 would   

A. increase total assets by $8,750.

B. reduce total equity by $8,750.

C. reduce total assets by $9,250.

D. increase total equity by $9,250.

75.Geode Company paid cash to purchase mineral rights on a large parcel of land. Which of the following choices accurately reflects how this event would affect Geode’s financial statements?     

A. Option A

B. Option B

C. Option C

D. Option D

76.On April 1, 2013, Texas Energy Company purchased an oil producing well at a cash cost of $6,000,000. It is estimated that the oil well contains 600,000 barrels of oil, of which only 500,000 can be profitably extracted. By December 31, 2013, 25,000 barrels of oil were produced and sold. The amount of depletion expense for 2013 on this well would be:   

A. $300,000.

B. $400,000.

C. $240,000.

D. $250,000.

77.The recognition of depletion expense   

A. decreases assets and equity and decreases cash flow from investing expenses under the direct approach.

B. decreases cash flow from operating activities, and does not affect the amount of total assets.

C. increases assets, equity, and cash flow from operating activities.

D. decreases assets and equity, and does not affect cash flow.

78.George Company purchased oil rights on July 1, 2013 for $2,400,000. If 200,000 barrels of oil are expected to be extracted over the assets life, and 30,000 barrels are extracted and sold in 2013, the recognition of depletion expense on December 31, 2013 would cause:   

A. a reduction in equity of $200,000.

B. a reduction in assets of $300,000.

C. a reduction in assets of $360,000.

D. an increase in equity of $400,000.

79.Which of the following would most likely not be expensed using the straight-line method?   

A. A copyright.

B. A building.

C. A timber reserve.

D. A patent.