1. A company sells a plant asset that originally cost $400,000 for $250,000 on December 31, 2020. The Accumulated Depreciation account had a balance of $165,000 after the current year's depreciation of $25,000 had been recorded. The company should recognize a

a. $15,000 gain on disposal.

b. $15,000 loss on disposal.

c. $40,000 gain on disposal.

d. $40,000 loss on disposal.

2. A truck that cost $80,000 and on which $70,000 of accumulated depreciation has been recorded was disposed of for $7,500 cash. The entry to record this event would include a

a. gain of $2,500.

b. loss of $2,500.

c. credit to the Equipment account for $10,000.

d. credit to Accumulated Depreciation for $70,000.

3. A coal company invests $20 million in a mine estimated to have 10 million tons of coal and no salvage value. It is expected that the mine will be in operation for 5 years. In the first year, 500,000 tons of coal are extracted and sold. What is the depletion expense for the first year?

a. $500,000

b. $1,000,000

c. $4,000,000

d. Cannot be determined from the information provided.

4. Drael Company incurred $600,000 of research and development costs in its laboratory to develop a new product. It spent $90,000 in legal fees for a patent granted on January 2, 2020. On July 31, 2020, Drael paid $60,000 for legal fees in a successful defense of the patent. What is the total amount that should be debited to Patents through July 31, 2020?

a. $600,000

b. $150,000

c. $750,000

d. Some other amount

Important note:

PLEASE SHOW WORK FOR ALL QUESTIONS!