1. On September 19, 2017, Markham Co. purchased machinery for $475,000. Salvage value was estimated to be $25,000. The machinery will be depreciated over eight years using the sum-of-the-years'-digits method. If depreciation is computed on the basis of the nearest full month, Markham should record depreciation expense for 2018 on this machinery of

a. $102,257.

b. $97,111.

c. $96,875.

d. $87,500.

2. On January 3, 2016, Salazar Co. purchased machinery. The machinery has an estimated useful life of eight years and an estimated salvage value of $120,000. The depreciation applicable to this machinery was $260,000 for 2018, computed by the sum-of-the-years'-digits method. The acquisition cost of the machinery was

a. $1,440,000.

b. $1,560,000.

c. $1,680,000.

d. $1,872,000.

3. Orton Corporation, which has a calendar year accounting period, purchased a new machine for $80,000 on April 1, 2013. At that time Orton expected to use the machine for nine years and then sell it for $8,000. The machine was sold for $44,000 on Sept. 30, 2018. Assuming straight-line depreciation, no depreciation in the year of acquisition, and a full year of depreciation in the year of retirement, the gain to be recognized at the time of sale would be

a. $8,000.

b. $6,000.

c. $4,000.

d. $0.

4. On January 1, 2017, the Accumulated DepreciationMachinery account of a particular company showed a balance of $1,480,000. At the end of 2017, after the adjusting entries were posted, it showed a balance of $1,580,000. During 2017, one of the machines which cost $500,000 was sold for $242,000 cash. This resulted in a loss of $16,000. Assuming that no other assets were disposed of during the year, how much was depreciation expense for 2017?

a. $342,000

b. $374,000

c. $100,000

d. $242,000

5. Piazza Co. purchased a machine on July 1, 2017, for $1,000,000. The machine has an estimated useful life of five years and a salvage value of $200,000. The machine is being depreciated from the date of acquisition by the 150% declining-balance method. For the year ended December 31, 2017, Piazza should record depreciation expense on this machine of

a. $300,000.

b. $200,000.

c. $150,000.

d. $120,000.

6. A machine with an eight year estimated useful life and an estimated 10% salvage value was acquired on January 1, 2016. The depreciation expense for 2018 using the double-declining balance method would be original cost multiplied by

a. 90% 25% 25%.

b. 75% 75% 25%.

c. 90% 75% 25%.

d. 25% 25%.

7. On April 1, 2016, Verlin Co. purchased new machinery for $450,000. The machinery has an estimated useful life of five years, and depreciation is computed by the sum-of-the-years'-digits method. The accumulated depreciation on this machinery at March 31, 2018, should be

a. $300,000.

b. $270,000.

c. $180,000.

d. $150,000.

8. Harris Co. takes a full year's depreciation expense in the year of an asset's acquisition and no depreciation expense in the year of disposition. Data relating to one of Harris's depreciable assets at December 31, 2018 are as follows:

Acquisition year 2016

Cost $280,000

Residual value 40,000

Accumulated depreciation 192,000

Estimated useful life 5 years

Using the same depreciation method as used in 2016, 2017, and 2018, how much depreciation expense should Harris record in 2019 for this asset?

a. $32,000

b. $48,000

c. $56,000

d. $64,000

9. A depreciable asset has an estimated 15% salvage value. At the end of its estimated useful life, the accumulated depreciation would equal the original cost of the asset under which of the following depreciation methods?

Straight-line Productive Output

a. Yes No

b. Yes Yes

c. No Yes

d. No No

10. Net income is understated if, in the first year, estimated salvage value is excluded from

the depreciation computation when using the

Straight-line Production or

Method Use Method

a. Yes No

b. Yes Yes

c. No No

d. No Yes

11. A plant asset with a five-year estimated useful life and no residual value is sold at the end of the second year of its useful life. How would using the sum-of-the-years'-digits method of depreciation instead of the double-declining balance method of depreciation affect a gain or loss on the sale of the plant asset?

Gain Loss

a. Decrease Decrease

b. Decrease Increase

c. Increase Decrease

d. Increase Increase

12. Galt Company acquired a tract of land containing an extractable natural resource. Galt is required by the purchase contract to restore the land to a condition suitable for recreational use after it has extracted the natural resource. Geological surveys estimate that the recoverable reserves will be 5,000,000 tons, and that the land will have a value of $600,000 after restoration. Relevant cost information follows:

Land $6,400,000

Estimated restoration costs 1,200,000

If Galt maintains no inventories of extracted material, what should be the charge to depletion expense per ton of extracted material?

a. $1.28

b. $1.40

c. $1.60

d. $1.52

13. In January 2017, Fritz Mining Corporation purchased a mineral mine for $6,300,000 with removable ore estimated by geological surveys at 2,500,000 tons. The property has an estimated value of $600,000 after the ore has been extracted. Fritz incurred $1,725,000 of development costs preparing the property for the extraction of ore. During 2017, 585,000 tons were removed and 525,000 tons were sold. For the year ended December 31, 2017, Fritz should include what amount of depletion in its cost of goods sold?

a. $1,197,000

b. $1,333,800

c. $1,559,250

d. $1,737,000