1. Farmer Company purchased machine on January 1, Year 1 for $56,000. The machine is estimated to have a 5-year life and a salvage value of $5,000. The company uses the straight-line method. At the beginning of Year 4, Farmer revised the expected life to eight years. What is the annual amount of depreciation expense for each of the remaining years in the machine's life?

a. $4.080

b. $5,080

c. $2,550

d. $3,175

2. Rosewood Company made a loan of $10,400 to one of the company's employees on April 1, Year 1. The one-year note carried a 6% rate of interest. What is the amount of interest revenue that Rosewood would report in Year 1 and Year 2, respectively?

a. $156 in Year 1 and $468 in Year 2

b. $468 in Year 1 and $156 in Year 2

c. $624 in Year 1 and $0 in Year 2

d. $0 in Year 1 and $624 in Year 2

3. On January 1, Year 1, Raven Limo Service, Incorporated paid $74,000 cash to purchase a limousine. The limo was expected to have a five-year useful life and a $14,000 salvage value. On January 1, Year 3 the limo was sold for $54,000 cash. Assuming Raven uses straight-line depreciation, the Company would recognize a

a. $4,000 loss

b. $6,000 gain

c. $6,000 loss

d. $4,000 gain