1.

Question 1

ABC Company purchased a computer on January 1, 2013, for $4,000. It is depreciated over 5 years using a straight-line method, with the salvage value of $500. On January 1, 2015, the remaining life of the computer is revised to 1 year with the zero salvage value due to the rapid technology development. What is the depreciation expense for 2015?

$1,000

$2,000

$2,500

None of the above

2.

Question 2

A machine costs $100,000 and has an estimated useful life of 5 years and a residual value of $10,000. If it is purchased on July 1, 2013, and the applicable tax rate is 35%, the 2015 depreciation tax shield for the straight-line depreciation is:

$6,300

$8,400

$7,350

$9,450

3.

Question 3

In terms of Question 2, what would the amount of depreciation for 2015 be, if the sum of years' digits method is used?

$21,000

$27,000

$18,000

$24,000

6.

Question 6

On July 1, 2010, Cynthia Corporation issued bonds with the face value of $400,000 carrying a 6% coupon. The bonds were issued at an 8% yield to maturity. Coupon payment dates are June 30 and December 31, the maturity date - June 30, 2020. The bond discount amortization for 6 months ending June 30, 2015 under the effective interest method will be:

$2,598

$2,702

$2,498

$2,810

7.

Question 7

In terms of Question 6, the total balance of the Discount on Bonds account as of December 31, 2013 will be:

$19,027

$39,943

$14,419

$35,335

8.

Question 8

In terms of Question 6 suppose that the straight-line amortization of the bond discount is used. Then the interest expense for 6 months ending June 30, 2017 will amount to:

$10,641

$12,000

$14,718

$13,826

9.

Question 9

The market price of the stock of WP Corporation is $66. If WP declares a 100% stock dividend, the market price will probably adjust to:

$66

$50

$132

$33

10.

Question 10

The equipment costs $48,000, has no salvage value, and is depreciated over 4 years. Straight-line depreciation is used for income reporting, and the sum-of-years' digits depreciation method - for tax purposes. The tax rate is 40%. The deferred income tax account at the end of year 2 will show:

A credit balance of $3,840

A credit balance of $2,880

A debit balance of $3,840

A debit balance of $2,880