1. Jerabek Inc. decided to sell one of its fixed assets that had a cost of $55,000 and accumulated depreciation of $35,000 on July 1, 2019. On that date, Jerabek sold the fixed asset for $15,000. What was the resulting gain or loss from the sale of the asset?
a. $5,000 loss
b. $5,000 gain
c. $15,000 loss
d. $15,000 gain
2. Heston Company acquired a patent on January 1, 2019, for $75,000. The patent has a remaining legal life of 15 years, but Heston expects to receive benefits from the patent for only 5 years. What amount of amortization expense does Heston record in 2019 related to the patent?
a. $5,000
b. $7,500
c. $15,000
d. $0-patents are not amortized.
3. Howton Paper Company purchased $1,400,000 of timberland in 2018 for its paper operations. Howton estimates that there are 10,000 acres of timberland, and it cut 2,000 acres in 2019. The land is expected to have a residual value of $200,000 once all the timber is cut. Which of the following is true with regard to depletion?
a. Depletion will cause Howton's timber inventory to increase.
b. Howton will record depletion expense of $280,000 in 2019.
c. Howton's depletion rate is $140 per acre of timber.
d. Howton should deplete the timber at a rate of 20% (2,000 acres ( 10,000 acres) per year.
4. Murnane Company purchased a machine on February 1, 2015, for $100,000. In January 2019, when the book value of the machine is $70,000, Murnane believes the machine is impaired due to recent technological advances. Murnane expects the machine to generate future cash flow of $10,000 and has estimated the fair value of the machine to be $55,000. What is the loss from impairment?
a. $5,000
b. $15,000
c. $30,000
d. $45,000