19 Which of the following describes the effect of recording depreciation expense at year-end?

A Net income decreases and total assets decrease.

B Total assets decrease and stockholders' equity is not affected.

C Net income decreases and total assets increase.

D Stockholders' equity is not affected and net income decreases.

20. On January 1, 2014, Woodstock, Inc. purchased a machine costing $40,000. Woodstock also paid $1,000 for transportation and installation. The expected useful life of the machine is 6 years and the residual value is $5,000. If Woodstock uses the straight-line depreciation method, which of the following statements is incorrect?

A The annual depreciation expense is $6,000.

B The December 31, 2014 book value was $35,000.

C The December 31, 2016 accumulated depreciation balance was $18,000.

D The December 31, 2015 book value was $24,000.

21 A machine, acquired for a cash cost of $15,000, is being depreciated on a straight-line basis of $2,700 per year. The residual value was estimated to be 10% of cost. The estimated useful life is

A 3 years.

B 4 years.

C 5 years.

D 6 years.

22. Warren Company plans to depreciate a new building using the double declining-balance depreciation method. The building cost $800,000. The estimated residual value of the building is $50,000 and it has an expected useful life of 25 years. Assuming the first year's depreciation expense was recorded properly, what would be the amount of depreciation expense for the second year?

A $30,720.

B $32,000.

C $58,880.

D $64,000.

23. Carter Company disposed of an asset at the end of the eighth year of its estimated life for $10,000 cash. The asset's life was originally estimated to be 10 years. The original cost was $50,000 with an estimated residual value of $5,000. The asset was being depreciated using the straight-line method. What was the gain or loss on the disposal?

A $1,000 loss.

B $4,000 loss.

C $5,500 gain.

D $10,000 gain.

24. Which of the following describes an accrued liability?

A It is an expense that has been both incurred and paid.

B It is an expense that has been incurred but not yet paid.

C It is an expense that has been prepaid but not yet consumed.

D It is a liability where the cash flow has taken place but the revenue has yet to be earned.