1.

An asset was acquired on October 1, 2018, for $78,000 with an estimated 5-year life and $13,000 residual value. The company uses units-of-production depreciation and expects the asset to produce 20,000 units. Calculate the gain or loss if the asset was sold on March 31, 2021, for $58,000. Actual production was: 2018=500 units; 2019=3,000 units; 2020=3,500 units; 2021=1,000 units.

Multiple Choice

A)$11,200 gain.

B)$19,000 gain.

C)$6,000 gain.

D)$12,500 gain.

2.

The costs of research and development performed by the company for sale to others (but not yet sold) would be included in which of the following accounts?

Multiple Choice

A)Research and development expense.

B)Sales revenue.

C)Inventory.

D)Cost of goods sold.

3.

On September 30, 2018, Corso Steel acquired a patent from Thermo Steel. The agreement specified that Corso will pay Thermo $1,000,000 immediately and then another $1,000,000 on September 30, 2020. An interest rate of 8% reflects the time value of money for this type of loan agreement. What amount of interest expense, if any, would Corso record on December 31, 2019, the companys fiscal year end?

Multiple Choice

A)$68,687.

B)$60,000.

C)$80,000.

D)$69,959.

4.

An activity-based method is most often used to allocate the cost of natural resources over its useful life because:

Multiple Choice

A)This method generally results in the highest amount of assets in the earlier years.

B)This is the simplest method, and natural resource activity is hard to estimate.

C)The usefulness of natural resources generally is directly related to the amount of the resources extracted.

D)This method generally results in the highest amount of assets in the later years.

5.On January 3, 2018, Tracer Incorporated purchased a patent for $450,000 to manufacture a new type of chair. The patent has a remaining legal life of 12 years. Tracer plans to manufacture the chair for eight years and then sell the patent for $50,000. The company amortizes intangible assets using the straight-line method. On December 29, 2020, Tracer decides to sell the patent for $325,000. Assuming the company has a December 31 year end, what is the gain or loss recorded on the sale of the patent?

Multiple Choice

A)$12,500 gain.

B)$25,000 gain.

C)$58,333 loss.

D)$25,000 loss.

6.

An asset was acquired on August 1, 2018, for $22,000 with an estimated 5-year life and $2,000 residual value. The company uses straight-line depreciation. Calculate the gain or loss if the asset was sold on April 30, 2020, for $13,000. Partial-year depreciation is calculated based on the number of months the asset is in service.

Multiple Choice

A)$3,000 gain.

B)$2,000 loss.

C)$6,000 gain.

D)$4,000 loss.

7.

Foreman Mining purchased land containing a copper deposit for $2,300,000 on January 7, 2018. The company expects to mine 600,000 tons of copper over the next 10 years, and the land is expected to have a residual value of $1,400,000. The company has also purchased mining equipment for $400,000 that will be used only at this site over the 10 years with an estimated residual value of $52,000. By the end of the first year, the company has mined and sold 50,000 tons of copper. What is the cost attributed to copper inventory for 2018, assuming the company uses the units-of-production method?

Multiple Choice

A)$109,800.

B)$124,800.

C)$104,000.

D)$75,000.